Energy Policy

Lord Peyton of Yeovil: asked Her Majesty's Government:
	Whether, in light of recent rises in fuel costs, they have re-examined the possibility of building one or more nuclear power stations.

Lord Triesman: My Lords, the Government's policy remains as set out in the White Paper Our Energy Future— Creating a Low Carbon Economy. We do not rule out the possibility that new nuclear build may be necessary at some point in the future. In common with all generation options, the initiative for bringing forward proposals to construct new plant lies with the generating companies, and no proposals have, as yet, been brought forward by the industry.

Lord Peyton of Yeovil: My Lords, I am sure the noble Lord does his best, but I am afraid that the Government do not allow him to do very well. Does he not realise that that White Paper on power supplies is becoming very frayed at the edges and ought no longer to be called in aid merely to repeat the old cry that the nuclear option is being kept open?
	I wonder whether the noble Lord would be kind enough to deliver a message to those two right honourable ladies who have charge of the departments which I believe take a detached interest in electricity supply. Will he tell them that if they continue to be as restrained—I almost said dumb—as they appear to be on this subject, they will be writing their name in history as the two people who contributed most to the lights going out, if and when they do?

Lord Triesman: My Lords, I hope that I generally try to do my best, especially for the noble Lord, Lord Peyton. I will certainly make sure that my right honourable friends receive the message that he has asked me to deliver to them. I just hope that I come through that experience as well.

Lord Tomlinson: My Lords, when my noble friend is passing the message to our right honourable friends, will he make sure that it comes from different parts of the House? Although perhaps not expressing it in quite the language of the noble Lord, Lord Peyton, will he say that there are a number of loyal supporters of the Government who will fail to understand if we allow the prospect of the nuclear generation of electricity to so degrade that we wind up with an electricity policy which is based more on a prayer that the policy on sustainable resources will be successful? I wish the programme on sustainable energy to be successful, but I am sure that most Members of this House want our nuclear option to remain available to us, should it be needed.

Lord Triesman: My Lords, I have a suspicion that my right honourable friends are aware of the views of my noble friend Lord Tomlinson. Just in case they are not, I will make sure that they hear those as well. However, I think that my noble friend does us a little less than justice. The research programme, which is directed both at keeping the nuclear option open and at the health and safety issues that are central to nuclear decommissioning—a matter of very grave concern—along with the programmes that are involved in making sure that we have the right skills in this country—which is also vital—are all alive and well, and compare well with programmes throughout Europe.

Lord Ezra: My Lords, following on from the first two interventions, and in view of the growing problems of energy pricing, security of supply and climate change—the last of which was referred to in recent speeches by the Prime Minister and Sir David King, the Chief Scientific Adviser—should the Government not now be urgently reviewing actions under energy policy, in particular both widening and speeding up the range of measures to be taken?

Lord Triesman: My Lords, the noble Lord, Lord Ezra, has made this point to great effect in your Lordships' House on a number of occasions, and I have the greatest sympathy with it. The Government must continue to look at all generation options, not only nuclear. The energy White Paper, in which I still have some confidence even if other noble Lords do not, states that the technological innovations will have a key part to play in underpinning the goals and delivering a low-carbon economy in a way that is cost-effective. We will continue to support research into the broadening of the options that are available, as the noble Lord, Lord Ezra, has just appealed to us to do. We will do that as a government, through the research councils. There will be public investment in research in the new energy technologies which will emerge in the future. I believe that the new energy centre established by the research councils is an extremely important addition to that armoury.

Lord Jenkin of Roding: My Lords, is it really true that in addition to the punitive conditions which the Government attached to the loan to British Energy— conditions which I described to the House only on Tuesday—they have acceded to a European Union demand that British Energy may not increase its capacity, nuclear or in any other way, until 2010? Now that the company is back in profit, what possible justification for that could there be other than that it suits the commercial interests of the French nuclear industry and it suits the prejudices of the Secretaries of State?

Lord Triesman: My Lords, I am certainly willing to write to the noble Lord to address any questions that have been reported about interventions from Europe. What I would say here today, however, is that the industry is obviously in a period of recovery generally. Forward electricity prices have more than doubled, as the noble Lord will know, from their lowest point in 2002. That is now being reflected in the final prices to electricity customers in the current contract round. We do not have estimates for the final prices that will emerge, but it will be the interests of the industry and its customers that will dictate those matters rather than anyone else.

Lord Dubs: My Lords, when he looks again at the much-maligned White Paper, will my noble friend consider the contribution that renewables are making to achieving our Kyoto targets? I believe that he will find that they are not doing sufficient—although I hope that they are. If we are to meet our Kyoto targets, going down the nuclear path is probably the only option that we have. If we leave it too long, we will have lost the technology, which will be found only in the Far East.

Lord Triesman: My Lords, it must be too early to strike such a pessimistic view about what can be achieved by renewables. The effort to increase the renewable platform is a relatively new one. The Sustainable Energy Policy Network believes that we are now delivering 80 per cent of the key milestones somewhat ahead of time or at worst on time with minor delays. I do not write off our capacity in engineering technology and science to do very well in renewable energy. However, that would still be no argument for closing down the nuclear option and I have been explicit that we do not do so.

Firearms Register

Lord Marlesford: asked Her Majesty's Government:
	What progress there has been on the establishment of a national firearms register, as required by Section 39 of the Firearms (Amendment) (No. 2) Act 1997; and when they expect it to become fully operational.

Lord Rooker: My Lords, as the noble Lord is aware, this matter is being taken forward as part of a national firearms licensing management system that interfaces to the police national computer. I understand from the Police Information Technology Organisation that a contract was agreed with Anite Public Sector Limited and that the development of the application was completed in July this year. However, a number of technical difficulties have come to light during the piloting of the programme, and I regret that it has been necessary to suspend the roll-out programme until the New Year, but it will be rolled out in the New Year.

Lord Marlesford: My Lords, is the Minister aware that in April 2000 the Home Affairs Select Committee, said that it was appalled that the national database was not an immediate prospect two years after the implementation of the Act? The Committee regarded it,
	"as absolutely central to the safe and effective operation of the firearms licensing system".
	Is it not a scandal bordering on an outrage that the Home Office, seven years after Parliament made a clear mandate for something really important in fighting crime and terrorism to be put into place, has failed to do so? If Ministers are unable to control the arrogance and incompetence of the Home Office, is there not a case now for the Parliamentary Ombudsman to take over an investigation into this whole matter?

Lord Rooker: My Lords, I fully respect where the noble Lord is coming from, as the author of the legislation, but this is not a case of maladministration. Clearly, there have been unacceptable delays, but the delays were known about and not easily avoided. There were resources to establish a link between the national DNA database and the criminal records on the police national computer and a freeze on all new applications to allow an essential upgrade of the police national computer. There were delays in the early part of the period that the noble Lord is talking about, which we fully accept. The scheme did not go full speed ahead, but the Government are fully committed to meeting the obligations under Section 39.
	A database on its own is of not much business benefit to the police. It has to work. It was set up and operational this summer and was piloted. Two key problems were discovered during the piloting. First, the system was unable to print the certificates, which I understand has mainly been dealt with now. Secondly, the system was running incredibly slowly; much too slowly for the police operational services. Those matters are being dealt with.
	By the way, I am quite happy—I am sure that such a thing has happened in the past—to invite the noble Lord to go to the Police Information Technology Organisation for a full update briefing, which it would be more than happy to provide. We are determined to get a full roll-out of this programme.

Lord McNally: My Lords, I do not think that the noble Lord, Lord Marlesford, is accusing the Government of maladministration; he is accusing the Home Office of dumb insolence. The reply to his Question may have been justifiable in 1998 or 1999, but it is totally unacceptable to Parliament seven years after the passage of the Act. The Minister has promised us action next year. I can assure him that the noble Lord, Lord Marlesford, will return to the charge and he will have full support. The Minister had better tell his officials that it is an insult to Parliament to ignore an instruction, which the Home Office resisted at the time and many people suspect is still resisting.

Lord Rooker: My Lords, when I was a daytime Home Office Minister, I was being chased in the House by the noble Lord on this issue, so I am fully aware of the background. I fully accept that action did not initially proceed with all speed. The Home Office found that there were other issues that needed resources. I freely admit that. On the other hand, the system was set to go live after piloting in September this year—the September just gone—so there is no delay. We want to get it running, but during the pilot there were a couple of issues that caused real problems. We could set a date, but unfortunately I do not have one at the moment. The roll-out will be early next year. However, there is not any undue delay on this. Activity is going on to get this system up and running. Notwithstanding that, it is true that for the first two or three years there was less than full-hearted full steam ahead on the issue.

Lord Crickhowell: My Lords, it was not just at the beginning that there were delays. Ministers have, on 18 separate occasions over the past six years, given the kind of undertakings to the House that the Minister is now giving. A lot of them have been given in recent years. Does not the Minister feel a sense of shame and humiliation on behalf of Ministers that they are unable to deliver the promises that they give to this House, and that such a codswallop has been made of this project that they cannot even meet their legal obligations?

Lord Rooker: My Lords, if what has just been said was true, the answer would be "yes"—but it is not. No Minister has come to this House over the years and said, "We have got the system up and ready to run". We are ready to press the button, but we needed to do a pilot study to ensure that the system worked—and we did that. The pilot identified a couple of key issues, as I have told the House, which are being dealt with at the present time. No Minister has got that far or that close to delivery.

Lord Waddington: My Lords, the noble Lord will of course recognise that it is wholly exceptional for there to be a delay of seven years in implementing a decision of Parliament. Is not the explanation that, not liking the proposal, the Home Office decided to set about the task in its own time and its own way? That is the whole trouble. Would not it have been better, if the Home Office had reservations about the proposal, to have been frank about it, come back to Parliament and, if necessary, produced amending legislation?

Lord Rooker: My Lords, I was not here of course when the legislation went through, but the House did not see fit to put a time scale on it.

Noble Lords: Oh!

Lord Rooker: My Lords, hang on a minute. Let us be clear about this. We are determined to implement the legislation, and there is no bad faith in that. But other issues—and I have indicated two or three of them—took precedence for of Home Office resources in the early years. There is no secret about that.
	The fact is that this system will be rolled out next year. It has got as far as the piloting, the issues discovered in the piloting are being corrected, and we will have the system rolled out. I just hope that I am around to be able to announce it.

Lord Mackie of Benshie: My Lords, does not the Minister agree that the trouble is not with licensed firearms but with unlicensed firearms? The register is essential for the police throughout the country in combating the dangers of unlicensed firearms.

Lord Rooker: My Lords, I take the noble Lord's point, but this system will not register unlicensed firearms.

The Earl of Shrewsbury: My Lords—

Lord Davies of Oldham: My Lords, it is time to move on to the next Question.

Waterways Museums

Lord Harrison: asked Her Majesty's Government:
	Whether they will provide new funding to safeguard the waterways museums at Ellesmere Port, Gloucester Docks and Stoke Bruerne.

Lord McIntosh of Haringey: My Lords, alas, no. We are supporting the development of museums across the country through the Renaissance in the Regions programme. We have limited resources, and DCMS is unable to offer the sort of long-term funding that the Waterways Trust is looking for. We have, however, approached the Museums, Libraries and Archives Council and asked it to take on a brokerage role for the Waterways Trust in an effort to help it to widen the funding resources available to it.

Lord Harrison: My Lords, in thanking my noble friend for that Answer, I wonder whether he would acknowledge the sharp fall of 11 per cent in visitor numbers in these museums following the introduction of the otherwise very welcome policy of free access to national museums, including those in Wales and Merseyside. That came after a period of a 24 per cent rise in visitor numbers. Therefore, the £1 million is needed to make up the shortfall in income; for the conservation required, on which there is a huge backlog; and, finally, for the cataloguing of the hugely important archival material which these museums retain, which retell the story of the industrial revolution. There is much technological innovation to be found in those museums.

Lord McIntosh of Haringey: My Lords, I do not dispute the attendance figures which the noble Lord quotes. It is certainly the case that the number of visitors to the waterways museums have fallen. But it is not right to claim that that is a result of the free admission to national museums policy. Only one of the three waterways museums—that at Ellesmere Port—is close to any national museum. I suppose that one could just about say, with a bit of exaggeration, that the Gloucester Docks were close to museums in Wales, but I doubt whether the visitor base is the same.
	On the other hand, the noble Lord makes a valuable point about the conservation aspect. We have contributed more than £300,000 over the past five years to the waterways museums as designated collections.

Viscount Falkland: My Lords, is it not the case that for the principle of free admission to work properly, there needs to be a much closer relationship between government funding and actual visitor figures, rather than forecast visitor figures? It is a case, if I may suggest, of the Government needing to do some fine tuning. Unless that happens, one will get a shortage of funding, which will result in suffering among museums such as those in the noble Lord's Question. That will mean that collections will suffer and will result in visitor figures in free fall.

Lord McIntosh of Haringey: My Lords, it is a bit of an exaggeration to say that, because we have a limited number of museums which now have free entry, that causes disaster to the many hundreds—even thousands—of other museums in this country. We have recognised that regional museums in this country have been underfunded.
	We have piloted the Renaissance in the Regions programme, which, in the two hub areas where it started, has been enormously successful. There have been increases of some 28 per cent in the number of children visiting museums there, and of 52 per cent in the number of children using the outreach facilities. Because it is so successful, we have decided to make the programme nationwide. So there is no neglect of museums outside the national museums in this country. There are always indefinite demands for funds which cannot be met, but we have been tackling the problem very seriously.

Lord Sheldon: My Lords, is my noble friend aware that, until recently, canals were not regarded as an important part of our history? When I was first elected in 1964, if somebody asked me what was the worst part of the constituency, I should have taken them to the Ashton Canal, a quarter of a mile from the centre, where there were rats, sewage and dereliction. If, today, someone were to ask me what was the best part of the area, I would take them to exactly the same place. The council has spent some money on it, which has produced enormously successful results. Will my noble friend see what can be done to encourage other councils to do the same?

Lord McIntosh of Haringey: My Lords, I agree with all of that. It is certainly true that the revival of canals for recreational purposes, both for boating and because they are attractive both as landscapes and for development, is a wonderful thing that has happened in recent years. A great deal of money, from the Government, donors and collections from local people, has gone into that scheme. But it is a slightly different question from the question of the three waterways museums.

Lord Brooke of Sutton Mandeville: My Lords, I declare a hereditary interest in that my 18th century Anglo-Irish forebear, Henry Brooke, wrote an important pamphlet on the Irish canal system in 1759. Can the Minister say whether the decline in numbers, which the noble Lord, Lord Harrison, reported in the context of the waterways museums, has been paralleled over the same period in similar small, regional museums?

Lord McIntosh of Haringey: My Lords, that is far too difficult a question to generalise about. Some have been going up and some have been going down.

Lord Faulkner of Worcester: My Lords, I declare an interest as chairman designate of the Railway Heritage Committee. As the canals occupy a central part in our nation's transport history, would not my noble friend agree that one of the answers to the funding of the canal museums is for them to come under the responsibility of the National Museum for Science and Industry? It does such an excellent job in looking after the National Railway Museum at York and, indeed, the new Railway Museum at Shildon, opened by the Prime Minister last Friday.

Lord McIntosh of Haringey: My Lords, that is an interesting suggestion. I shall ask the Museums, Libraries and Archives Council to take it into account. The implication of some of these questions is that there is no government funding for the waterways museums. That is not the case. The British Waterways Board gives the museums £750,000 a year, which comes from its Defra funding. Unlike many museums, they get national money.

Sport and Physical Activity: Playing Fields

Lord Addington: asked Her Majesty's Government:
	How many playing fields and accessible open public spaces are needed to achieve their targets for physical activity and sport.

Lord McIntosh of Haringey: My Lords, it is estimated that approximately 27,000 sites contain playing pitches in England, and the Government have put in place a number of effective measures to protect them. However, there is no one-to-one relationship between the number of playing fields and open spaces and the Government's targets on physical facilities and sport. Playing fields are only one of many ways in which the Government are working to increase participation in physical activity. In addition to suitable outdoor provision, we need better indoor provision such as multi-sport facilities. We need to make better use of our stock of existing sports facilities.

Lord Addington: My Lords, I thank the noble Lord for that Answer. Does he accept that, if we want to use sport as one of the main driving forces towards greater physical activity, especially in the long term, we need to address seriously such anomalies as 94 per cent of changing rooms for football being unsuitable for women, according to the Football Foundation? What exactly are the overall targets for greater physical activity?

Lord McIntosh of Haringey: My Lords, of course I do not disagree with what the noble Lord says about there being, in the classic phrase, much more to do. However, a huge amount is being done in this area. The new opportunities for PE and school sports programmes involve £630 million in England and Wales. The NOF green spaces programme has £22 million for playing fields, and the Football Foundation is funding 550 projects at a cost of £62 million.

Baroness Billingham: My Lords, the question is inextricably linked with the sale of school playing fields, which has caused great anger and anxiety in all parts of the House. Can the Minister give us a definitive statement of the Government's policy on the issue? Can we once and for all lay aside the allegation that we are asset-stripping that vital and priceless facility?

Lord McIntosh of Haringey: My Lords, there has been a great deal of anxiety about planning applications for playing fields, which I quite understand. In most cases, such applications are needed for the changing-room facilities and so on, so very few mean losing playing-field space. Of the approved planning applications, 90 per cent benefit sport or do not in any way damage it. The Department for Education and Skills and the National Playing Fields Association have now agreed a formula whereby, if there is any financial benefit from the disposal of playing fields, it will go on outdoor sporting recreational facilities.

Lord Monro of Langholm: My Lords, will the Minister accept that governing bodies such as the National Playing Fields Association and the CCPR believe that there are nothing like sufficient playing facilities in schools if children are to translate and transfer to sports clubs later on? Will he also agree that the safeguards that he has told us have been put in place to stop the sale of school playing fields have not worked satisfactorily, and that such sales are still going on?

Lord McIntosh of Haringey: My Lords, I agree with the first question but not the second. As I made clear, there is a huge backlog of investment and maintenance, particularly in school playing fields. The figures that I gave show how determined we are to make up that backlog, but I do not claim that it can be done in a year or two. I have already answered the second question. The number of applications for changes to school playing fields that involve the loss of playing-field facilities is completely minimal now. I made the advantages gained by facilities from the planning changes clear in my answer to the noble Baroness, Lady Billingham.

Lord Moynihan: My Lords, the Minister will be aware of the important measures to protect sports buildings, such as pavilions, from demolition that were announced by the Government on 24 July 2000. Why has nothing happened in the subsequent four and a half years? Why do they continue to postpone the legislation?

Lord McIntosh of Haringey: My Lords, some such matters require legislation and some do not. One of the most important issues has been strengthening protection through public planning guidance 17 in July, which has gone a long way to answering the noble Lord's questions without the need for legislation.

Lord Lucas: My Lords, is the noble Lord aware that one reason why sport flourishes so much in Australia is that Australian sport clubs are able to gain substantial revenues from gambling? If we are to have in this country an extension of slot machines with high payouts and an extension of the amount that people gamble, would that not be better done for the benefit of sport clubs, in an environment that is at least some form of community rather than in the anonymous and vast American-style casinos proposed in the current Bill?

Lord McIntosh of Haringey: My Lords, the noble Lord will have plenty of opportunity to display his prejudices on those matters. There is no plan for a vast extension of what Australians call "pokies" in this country. Certainly, there is no plan to have, as in Australia, either provincial or national government dependent on gambling revenues for things such as sport.

Pensions Bill

Baroness Hollis of Heigham: My Lords, I beg to move that the Bill be now further considered on Report.
	Moved, That the Bill be further considered on Report.—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.
	Clause 111 [Investment of funds]:

Baroness Hollis of Heigham: moved Amendment No. 134:
	Page 80, line 42, at end insert—
	"(1A) When exercising the power conferred by subsection (1) in relation to the Pension Protection Fund, the Board must have regard to—
	(a) the interests of persons who are or may become entitled to compensation under the pension compensation provisions (see section 160) or any corresponding provisions in force in Northern Ireland, and
	(b) the effect of the exercise of the power on the rate of any levy which may be imposed under section 172 or 173 or any corresponding provision in force in Northern Ireland and the interests which persons have in the rate of any such levy.
	(1B) When exercising the power conferred by subsection (1) in relation to the Fraud Compensation Fund, the Board must have regard to—
	(a) the interests of members of occupational pension schemes in relation to which section 187(1), or any corresponding provision in force in Northern Ireland, applies, and
	(b) the effect of the exercise of the power on the level of any levy which may be imposed under section 187 or any corresponding provision in force in Northern Ireland and the interests which persons have in the rate of any such levy."

Baroness Hollis of Heigham: My Lords, I love the enthusiasm for pension matters.
	Clause 111 provides for the board to invest for the prudent management of its financial affairs, and for it to appoint at least two fund managers with the appropriate knowledge and experience. We are introducing the amendment in response to the points raised in earlier debates in this House about investment by the PPF board.

Lord Higgins: My Lords, which amendment is the Minister moving?

Baroness Hollis of Heigham: My Lords, I am moving government Amendment No. 134. I apologise if I said differently.

Lord Higgins: My Lords, my problem was simply that I had some difficulty relating the noble Baroness's remarks to Amendment No. 134. They seemed to have little to do with it. Amendment No. 134 is about Northern Ireland, as I understand it.

Baroness Barker: My Lords, we too were expecting a speech on Northern Ireland.

Baroness Hollis of Heigham: My Lords, I am slightly thrown. I am confident that I am speaking to the right amendment. Let me finish. It is about,
	"the interests of persons who are or may become entitled to compensation under the pension compensation provisions . . . or any corresponding provisions".
	Let me contextualise it for a moment. When noble Lords pressed me on the matter, they were anxious that the statement of investment principles should have due regard to the interests of the parties concerned. The reference to Northern Ireland is that whatever we introduce extends to Northern Ireland, or we would have to table a separate amendment for it. There should be no misunderstanding about that. I am sorry; I suddenly thought that I had got the wrong file, but I think that I am correct. We are introducing this amendment in response to the points raised in earlier debates in this House about investment by the PPF board. Perhaps to the noble Lord's surprise, which may be why he is slightly taken aback, we have listened to the debate and brought forward an amendment to address, I hope, the concerns raised on opposition Benches. This amendment expands on the provisions of Clause 111 and clarifies the interests which the board must consider when exercising its powers to invest in relation to the Pension Protection Fund and the Fraud Compensation Fund.
	The amendment provides that the board must consider the interests of two key stakeholders when exercising its powers to invest. When investing in the Pension Protection Fund, the board must consider the interests of current and potential recipients of PPF compensation and the interests of those who are responsible for paying the levy—that also applies to Northern Ireland. Similarly, in investing in the Fraud Compensation Fund, the board must consider the interests of occupational scheme members and of fraud levy payers. Of course the board remains responsible for its own financial management and investment strategy. The principle that the PPF shall be an independent body which operates at arm's length from government is unaffected by the amendment.
	We have reflected on earlier debates and we think—in fact, I think—that the case has been made well by the opposition parties for some clarification of the board's investment objectives which are consistent with the overall aim of prudent management of its financial affairs, so that the PPF provides cost-effective compensation for pension scheme members. The amendment promotes those aims and I urge the noble Lords to accept it.
	I should add that I have in hand a version of a draft regulation to that effect; it is brief—about a page and a half—and we will be sending it out to consultation. So, given that it is a draft and may need to be altered I am happy, if it helps noble Lords, to circulate it to them for their consideration before Third Reading to discover whether they feel that the Government have met the concerns raised by the opposition parties in Committee.
	With that, and, I hope, the entirely benign, entirely welcome and entirely enthusiastic response that I anticipate from the Benches opposite, I beg to move.

Lord Skelmersdale: My Lords, yes, certainly our reception to the amendment is enthusiastic, as the noble Baroness said. These were points that were raised at earlier stages of the Bill. It always occurred to us that it is odd that the PPF, when taking over schemes in particular circumstances, should not have a direction at any point and that it should look after the best interests of the members that it acquires—either deferred, existing or potential.
	So it is with many thanks that I, for one, accept the amendment. I should say that, at the beginning of this second day of the Report stage, the Minister has been exemplary in examining our points—certainly some of my more obstruse ones—and she has taken enormous trouble to prove me either wrong or half right. I am particularly grateful.
	We and the Liberals Democrats will look forward eagerly to the draft regulations—a theme that I have pursued throughout the Bill's progress. We understand the health warnings of which the Minister has advised us.

Lord Oakeshott of Seagrove Bay: My Lords, we, too, welcome the amendment and the spirit in which it has been moved. Given that we are talking about investment policy, perhaps I may ask the Minister whether she has received and seen the recent paper on investment policy for the PPF published by the National Association of Pension Funds and, in particular, its conclusion that the fund would need to run in an extremely risk-averse manner; which, by that token, would yield a very low return and a very expensive long-term investment policy. I would welcome her views, because it cannot be in the interests of the fund or its potential beneficiaries to have a very low return investment policy in the long term.

Baroness Hollis of Heigham: My Lords, I am grateful for that generous response. I will ensure that the draft regulations are circulated with health warnings. Indeed, I have a copy of the NAPF report here; I have read it and we are reflecting upon it. We welcome the NAPF view that investment decisions should consider the interest of both levy payers and recipients. We are setting parameters and it will be for the board to take its investment decisions as an independent non-departmental public body, operating at arm's length from government. NAPF is a, if not the, major player in the field. Its views would be taken seriously, but some of the earlier discussion regarding two-fund managers and so on will allow the board to have access to independent professional financial advice, which it will be able to assess in the light of some of the concerns raised by NAPF. So we are well aware of those concerns and, as the noble Lord would agree, whether we endorse them or not, it will be for the board to consider in the light of its professional advice.
	Having said that we have taken those comments on board—or, at least, registered them—I hope that your Lordships will agree to the amendment.

On Question, amendment agreed to.
	Clause 112 [Investment principles]:

Lord Lucas: moved Amendment No. 135:
	Page 81, line 23, leave out subsection (3).

Lord Lucas: My Lords, in moving the amendment, I shall not speak to Amendment No. 136.
	The amendment concerns the degree to which the Government should be able to dictate the investment principles under which the fund should operate. I welcome the amendment that we have just passed. The noble Baroness has, as she said, responded to our comments in Committee and has produced a fine answer to them. Sadly, regarding her response to the points that I have raised, she is rather better at defeating my arguments than conceding to them. I feel strongly about this matter. If the fund is to work well, the investment principles of that fund must be free from direct mandates from the Government.
	The example given by the Minister in Committee was that it might be the wish of the Government to specify that the fund should be invested ethically. Well, yes, but that is the grassy green top of a very slippery slope. We do not have to look that far back to be aware that it would have been in the minds of Mr Heath and Mr Wilson and others that the money should be invested in supporting the steel industry or keeping coal mines open. Once you give the Government the power to dictate how money is invested, then some Secretary of State, at some time, will use it. It is in the nature of politicians and governments that that should be so.
	If we want the fund to be regarded seriously and to be accepted by those who will have to continue to put money into it, the investment principles should be based on the noble Baroness's Amendment No. 134, not on the particular whims of the Minister at the time. It strikes me that any proper influence that the Government wish to exert can be exerted under subsection (4) by prescribing the form of the statement of investment principles. They can say that it must cover such matters as investment or whatever else the Government are concerned about and thereby ensure, by making the fund report on those matters, that it is run in accordance with best principles. But to be able to impose a diktat, so that the investment shall be in accordance with the wishes of the Government, runs entirely counter to the amendment that we have just passed.
	Beyond anything else, this fund will be an important precedent. We face a substantial crisis in pensions. We are looking around for a vehicle that we can use to enable people without great means to invest on acceptable terms and at acceptable costs, to help to provide pensions for themselves.
	To my mind, this fund is a pretty good model of what might be used. It is run centrally but the investment is made professionally. The investment principles are set out clearly but, as I said, it is crucial that those principles are in the interests of the people providing the money and not in the interests of the government of the time. I would be very sad to see the fund become a potential political plaything. I say that not in relation to the current incumbent but, looking back at our history, it is not impossible that such a temptation will be resisted. I cannot see that there is anything in subsection (3) which cannot be done equally well through subsection (4), which would not pose anything like the same dangers to the future management and general acceptance of the fund. I beg to move.

Lord Higgins: My Lords, I think that my noble friend's amendment is helpful. In considering it further, we shall need to look very carefully at what the Minister says and, if necessary, return to the matter at Third Reading. In Committee, we had an extensive debate on investment principles. It is very important that we get those right because, in effect, the Pension Protection Fund will operate in much the same way as any other pension fund and, as in the case of individual pension funds, it is important that we are clear about the exact principles.
	Rightly, what concerns my noble friend is that the wording of the clause is too wide, and we are not clear about exactly what the Government have in mind. One would expect a number of normal, if I may put it that way, investment principles to be specified. But, in particular, as the clause states specifically that the board must comply with any prescribed requirements, the question is whether the Government would impose any requirements which might be objectionable.
	Some three or four years ago, a Minister issued a general circular to those in charge of pension funds about so-called "ethical investment" and asked them to respond. Generally speaking, the crucial point is that the assets should be invested in a way that maximises the benefit to the beneficiaries, and that is the primary responsibility of the trustees.
	A few days ago, I was interested to come across a paper circulated by the universities' pension fund, which, I understand, is the second largest fund in the country. It raised both the question of the extent to which the fund should take into account good governance, which is entirely understandable, and, secondly, the question of the ethical issues—for example, whether the fund should not invest in tobacco companies, even though they might give a better return than alternative investments.
	I think that my noble friend's concern arises both from the history of the matter to which I have just referred and also from the general feeling that this is a matter which should not be dictated, as it could possibly be by this clause, by the Government. Therefore, I hope that the noble Baroness can assure us that it is not the intention of the Government that the so-called "prescribed requirements" should seek to influence the decisions of the Pension Protection Fund in the way that I have just described. As I said, it will be important to consider carefully what the Minister says and, if need be, return to the matter at Third Reading. It is an important issue.
	Perhaps the noble Baroness will also comment specifically on the point made by my noble friend; namely, whether there is any way in which subsection (3) can be dispensed with because it is reasonably covered by subsection (4).

Lord Oakeshott of Seagrove Bay: My Lords, we on these Benches support the amendment. As we discussed in Grand Committee, we think it is very important that there are clear, simple and limited objectives for the investment policy of the PPF. One does not want to end up with a kind of Christmas tree on which all sorts of worthy objectives are hung. One needs a simple, clear objective, which is basically to maximise the investment return, subject to an acceptable level of risk, or something on those lines.
	I completely agree with noble Lords on the Opposition Benches that, when one is setting up a Bill and establishing the structure for the long term, however much confidence one might have in the existing incumbents or, indeed, in the board not to abuse that, it is important that the principles are set out clearly and in statute at the beginning. On that basis, I very much support the amendment.

Baroness Noakes: My Lords, I support what my noble friends have already said and, in particular, what my noble friend Lord Lucas said and his contention that, by removing subsection (3), nothing of substance would be taken away.
	If the Minister believes that something of substance would be taken away by removing subsection (3), will she consider an alternative formulation which would imply that government had less ability to interfere with the proper running of the fund—that is, a duty of consultation with the Secretary of State? If there is a need for the Government to have some formal contact with the fund in connection with its investment objectives, it seems to me that it would be less objectionable if they did not have a power to tell the pension fund what to do by regulations but the ability and duty to be consulted.

Baroness Hollis of Heigham: My Lords, I can see where Opposition Members are coming from but, for once, if I may say so, I think that we are making slightly heavy weather of this. Perhaps that is because noble Lords need more of a gloss on subsections (3) and (4) than they have had so far, and I hope to be able to allay their concerns.
	These amendments seek to remove from Clause 112 the power to make regulations regarding the requirements to which the PPF board must adhere prior to preparing or revising a statement of investment principles and the minimum requirements concerning the matters that the statement should cover. I hope that our amendments to Clause 111 have reassured the House that we shall have regard to the interests of key stakeholders when investing for prudent financial management. In doing so, we have also underlined that the provisions of Clause 112 are not designed to give this or future governments some unfettered control or leverage over the board's investment principles.
	I want to reassure noble Lords that, as they have told me, statements of investment principles have been a feature of pension schemes, both public and private, for many years and, in the light of your Lordships' debate, that is the path that we are now pursuing. The draft does, indeed, cover issues such as the impact of the nature of the board's liabilities on its investment strategy, the kinds of investments to be held, the balance between different kinds of investment, and so on. Those are fairly conventional things. Noble Lords may wish to pursue this matter at Third Reading, although I rather hope that they do not.
	I turn to the point of the subsections. With regard to subsection (3), as I mentioned during our previous discussion, the requirements that we envisage are simply that, before preparing or revising a statement of investment principles, we shall require the board to obtain and consider relevant expert advice. I hope that the House will agree that, under the circumstances, that is a reasonable regulatory requirement.
	Subsection (4), to which the second amendment relates, is simply about requiring the board to cover a limited number of key areas in the statement in order to provide a degree of accountability to all its stakeholders; for example, the kind of investments held and the balance between them. Nothing in this provision fetters the board's freedom to invest as it sees fit, subject to Clause 111. That is the type of area in which the Government expect these subsections to be used.
	As I said, I think that in this case, if I may say so, the Opposition are reading ogres into sensible and useful requirements, such as the requirements to consult and to take professional advice—the kind of thing that I mentioned during the previous discussion. I hope that those reassurances will allay the fears of Members opposite and that the noble Lord will be happy to withdraw the amendment.

Baroness Noakes: My Lords, before the noble Baroness sits down, the explanation of subsection (3) seems wholly innocuous, but could the subsection be used, for example, to tell the board to invest in certain categories of investment? Could the power be used in that way?

Baroness Hollis of Heigham: My Lords, I am led not to believe so, but I shall clarify that point.

Lord Lucas: My Lords, I should be grateful for that clarification because my concerns were principally raised by the illustration that the noble Baroness chose to use in Committee. She said specifically that this clause could be used to direct the board to invest ethically.

Baroness Hollis of Heigham: My Lords, I apologise. I realise that noble Lords are handicapped by not having the possible draft regulations in their hands. The regulations could state, for example, the extent, if at all, to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments. That would be the kind of matter that the board would determine—not the Secretary of State.

Lord Oakeshott of Seagrove Bay: My Lords, before the noble Baroness sits down, can she clarify a point? Is she saying that ethical and social considerations will be matters for the board to take into account in its investment policy?

Baroness Hollis of Heigham: My Lords, this is Report stage. The statement of investment principles is a transparency measure only. The board must set out its own principles. Therefore, there is no scope at all for ministerial diktats and directions on how the board should invest. However, the phraseology of one of the draft regulations that we are proposing to issue—with health warnings attached, so that we know what will be considered in the investment principles—is, "the extent, if at all, to which social, environmental or ethical considerations". There is probably a division of views between the two Opposition Benches about whether that should be included. "If at all" it should be included will be for the PPF board to determine.

Lord Lucas: My Lords, I am very grateful to the noble Baroness for saying that she will circulate noble Lords with the draft regulations before we come to Third Reading. That will be crucial to our understanding of where this clause may lead. If the noble Baroness is going along those lines, I should be much more comfortable with something on the lines proposed by my noble friend Lady Noakes; that is, that rather than having a diktat, we must have regard to guidance. That would remove the possibility of this clause ever being used to override the amendment we have just passed, or the other objectives which are quite properly in the Bill as regards the management and investment of the fund.
	The noble Baroness has not allayed my fears, but she has directed me to a considerable amount of reading and thought before Third Reading. I shall include my noble friend on the Front Bench in that. We shall certainly return to the issue if there are any remaining problems. To my mind, it is absolutely crucial that we get this right. It would be like leaving a cyanide capsule in someone's mouth and hoping he does not close his jaws. If this is wrong, it could cause such damage. It could entirely be misunderstanding. I shall know much more when I have read Hansard and the documents that the noble Baroness has but I do not. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 136 not moved.]
	Clause 114 [Grants]:

Lord Oakeshott of Seagrove Bay: moved Amendment No. 137:
	Page 82, line 12, at end insert—
	"( ) The Secretary of State shall have the power to make loans to the Pension Protection Fund in prescribed circumstances."

Lord Oakeshott of Seagrove Bay: My Lords, the amendment stands in my name and that of my noble friend Lady Barker. It raises an important issue of principle, as all sides of the House recognise, on which we on these Benches feel very strongly. The effect of our amendment is to make the Government the lender of last resort to the Pension Protection Fund if the fund, at some future date, were to get into financial difficulties.
	We know that there are provisions whereby the PPF can borrow commercially, but clearly if we are dealing with a situation in which equity markets are very depressed and firms are going bust in large numbers, the PPF will not be in a good commercial position to borrow money on the markets. Indeed, an effective government fallback guarantee of the fund's position, very similar to that which the Government happily employ in the case of Network Rail and a number of other areas, will make it easier for the PPF to borrow money commercially, as its first line of defence, if you like, without having to call ultimately on a government guarantee.
	The reason we take that view is that, first, the Government have set up the Pension Protection Fund; they control appointments to its board; and, effectively, they have designed its basic rules of operation. In sum, the Government pull all the PPF strings, but what happens if it gets into difficulties? What will the Government say, "It is nothing to do with us, gov"? That is the epitome of power without responsibility.
	It seems to us a matter of simple prudence to plan for emergencies before one sets out on a voyage as uncharted and as hazardous as I believe we would all agree the new PPF will be. We have had some very interesting, detailed and robust work by Professors Neuberger and McCarthy, pointing out how the risk of large claims on the PPF is likely to be very concentrated at some future date. I believe that we should all take that piece of work very seriously. We feel that that is an important issue.
	Let me paint, in practice, the situation that we would be in if the PPF found itself in difficulties. We on these Benches do not believe that it would be appropriate to cut what we believe are the proposed, reasonably modest payment levels that the PPF will make. We are very taken with what the new PPF chairman, Lawrence Churchill, has been saying, that the PPF must do "what it says on the tin". As far as we are concerned, the levels of benefits that it proposes are "what it says on the tin".
	For the fund to have to cut benefits if it were in serious difficulties would be a cruel delusion and deception to people whose pensions are paid by the PPF. They will probably already have been through the wringer, if I can put it that way, with their own company having gone bust and their own pension fund being unable to meet its liabilities. Then to make them suffer further pressure and difficulties, without the Government standing by as lender of last resort, puts them in, if I may use a police term, double jeopardy.
	In sum, if the PPF were to be allowed to go down or even if it were in serious danger of going down, that would make Equitable Life look like a vicarage tea party.
	There is a clear precedent for what we are suggesting in the Pool Re arrangement for the insurance of commercial buildings against terrorist attack. The Treasury explicitly stands behind commercial insurance companies and unconditionally guarantees their obligations. I have raised this matter a number of times in the House and in Grand Committee, but I have not received a proper answer. I appreciate that this is not the responsibility of the noble Baroness, but I must press her on this. I ask her to obtain the proper answer from the Treasury on this point.
	The one answer she gave me in Grand Committee was that the Government would not wish to underwrite the PPF as last resort because not all taxpayers benefit—far from all taxpayers benefit from membership of defined benefit pension schemes. But that argument applies equally to the Pool Re arrangement. Far from all taxpayers—indeed, only a fairly small minority of taxpayers—own commercial buildings and, therefore, benefit from the Government standing behind insurance companies in that way. This is an important issue of principle and we shall wish to press the matter. I beg to move.

Lord Higgins: My Lords, the noble Lord, Lord Oakeshott of Seagrove Bay, is right to say that it is an important issue. We have given careful consideration to it and will await with interest the response to the point that he made about the Government standing behind those insuring buildings, and so on, that might be subject to terrorist attack. The Government, of course, in effect, stand behind individuals or other bodies on which a terrorist attack may have a serious impact.
	I am surprised that the noble Lord did not compare the situation to that in the United States, where the body on which, in many ways, the PPF is modelled has run into very large deficits. None the less, even ahead of the presidential election, the US Government did not come to the view that they should act as lender of last resort.
	One can envisage disastrous scenarios in which it may be difficult for the PPF to borrow in order to cover its responsibilities, although there are various ways in which the PPF could adjust its affairs to minimise that. Even without a disaster, there is scope for considerable peaks and troughs in the operation of the PPF. That could create difficulties, as I have stressed, in the early years of the PPF, before any substantial cushion has been built up. None the less, the argument made by the noble Baroness in Committee that the provision would mean that taxpayers would, in effect, guarantee the position, if, in a crisis, the Government were to act as lender of last resort, whereas only a comparatively small part of the population would benefit from such an arrangement, has considerable force. I am somewhat persuaded by that, although others may legitimately take a different view. I await with interest any further elaboration from the noble Baroness.
	The other point that we debated in Committee was whether the cost of borrowing would be less on the part of the PPF, if the Government stood behind ordinary loans. The Government borrow at gilt-edged rates, and everyone else—even bodies such as the PPF—borrows at rates closer to or even higher than commercial rates. However, that point is separate from the main thrust of the argument made by the noble Lord, Lord Oakeshott of Seagrove Bay. I understand why he feels strongly about the matter, but I do not think that we will want to support the amendment. Perhaps, my noble friends will take different view.

Baroness Noakes: My Lords, it is always difficult to know whether a government should explicitly take powers either to lend or to guarantee. I understand that there is no power to guarantee the borrowing of the PPF.
	In setting the PPF afloat without any ability to support it if things go badly, the Government are raising the real possibility that a crisis will occur. It could occur relatively quickly, if there were a bunching of schemes being taken into the fund. Will the noble Baroness explain how the Government see such a crisis being resolved, if the Government themselves have no levers at their disposal?

Lord Fowler: My Lords, I accept what my noble friend Lord Higgins said about the United States. It is a strong point. I understand that, to some extent, he is constrained by making commitments in this area.
	Having said that, I agree with what the noble Lord, Lord Oakeshott of Seagrove Bay, said. The effect of the provision would be to make the Government the lender of last resort to the protection fund. At present, the board can borrow, but only from deposit takers, as set out in the Bill. As the noble Lord, Lord Oakeshott of Seagrove Bay, said, there could be difficulties with that. The Bill allows the Secretary of State to pay the board money, but only for administrative expenses. Payment of such money in compensation is specifically banned.
	It is unrealistic to believe that the Government can divorce themselves from the issues as starkly as they want to do. The debate on the previous amendment, which got more fascinating the longer it went on, showed the difficulties that the Government were getting into by seeking to go down that road. Obviously, there is an issue of principle. What effect will a fund financed in the way proposed have on encouraging new final salary schemes? I suspect that it will be a further discouragement, not an encouragement. However, that decision has been taken, and that is not what we need to debate.
	The Government's policy is to see the setting-up of such a protection fund. Certain consequences flow naturally from that decision. It raises the expectations not only of scheme members but of the public generally that, in all circumstances, they will be protected, at least to the extent that the Bill protects them. Ministers, not least the Prime Minister, make that point and claim that it is a great advance in pension protection. I simply do not see how, in those circumstances, the Government can say that they will never, in any circumstances, stand behind it. They are not able morally to make that point.
	The public expectation is there, and consequences flow from that. I am sure that the Treasury will oppose what is proposed, but, if I may speak personally, I do not regard that as conclusive. The Treasury has been the biggest obstacle to sensible pension reform in this country over the past 20 years, so I am not persuaded by that argument.
	It would be sensible—prudent—for the Government to make the amendment. The noble Lord, Lord Oakeshott of Seagrove Bay, has made a strong case.

Lord Lucas: My Lords, I agree with my noble friend. He has more experience of such things than I do. I was carried along by his analysis. I cannot see how, in a crisis, the Government would not be there to make sure that the pensions were paid. I cannot see them funding the deficit, but the pensioners of the fund should not suddenly find that they are not being paid because the fund is in problems. The Government cannot, having set the thing up, escape the moral responsibility.
	As the noble Lord, Lord Oakeshott of Seagrove Bay, said, we must expect the fund to hit catastrophic problems at some stage. Things are bad enough at the moment, but, with the Bill enacted, they will be much worse. The provisions relating to how the regulator will go after deficits and require funds to be put in place and so on will mean that, as soon as a company gets financially near the edge in any way, the full Section 75 deficit will swing into place and accelerate the company down the slope. That will make it even harder to find a way of refinancing and make the whole business of refinancing extremely dangerous. It will increase instability and greatly increase the chance of major pension funds coming into the fund together.
	The additional Section 75 deficit on the FTSE 100 is £100 billion. A total of £500 billion additional Section 75 deficit is out there and could come crashing into the fund. What if 10 per cent comes in at once? I can see why the Government are frightened by such a sum. They do not want to find themselves suddenly having a commitment to cover it. None the less, if such a thing happens, something will have to be done. A lot of people who had believed that the Government had done well by them will find that they are not there.
	We have had enough in the pensions industry of promises that are not really promises. The Equitable Life business was the latest. Everyone believed that the bonuses were somehow magically created without any need to worry about the performance of the underlying investments. This is the same thing: people will believe that the safety is there in some magic way because of the Bill, but the risks are still there. Through this Bill, the Government are putting themselves in the moral position not only of having to stand behind the total deficit, because doubtless that will ultimately return to industry, but also of ensuring that pensioners receive their cheques every month. The idea that the Government will not let that happen is ridiculous.
	I support the noble Lord, Lord Oakeshott. I am sorry to disappoint my noble friend on the Front Bench. I imagine that he has constraints from the shadow Chancellor; fortunately, Back-Benchers are not bound in that way.

Baroness Hollis of Heigham: My Lords, I disagree profoundly with the amendment. As the noble Lord, Lord Oakeshott, made clear, and the noble Lord, Lord Lucas, reconfirmed, it would make the Government the lender of last resort whereby they would stand behind the PPF and be a source of funding should people believe that the PPF needs it. In other words, the Government would be a funding agency for the PPF. Obviously, that has been pursued at various stages; industry would like nothing better under certain circumstances. But, for reasons on which I shall enlarge, we believe profoundly that, if people believe that the Government will, or could, be the lender of last resort, they will end up as such. To some degree, it would be a self-fulfilling prophecy.
	I wish to enlarge on those arguments. Clause 114 sets out the funding arrangements for the administration costs of the board of the PPF. It provides for these costs to be met through a grant-in-aid. The Secretary of State will recover that expenditure through the administration levy. The amendment would allow that, in certain circumstances, the Secretary of State would also have the power to make loans to the board, loans that could be used not only to cover administrative costs but also to pay PPF compensation. The amendment would make the Government the lender of last resort, meaning that they could be required to act as guarantor for the Pension Protection Fund.
	There are profound reasons why I feel strongly that the amendment is wrong, not merely as a matter of fact or on grounds of industry best practice. On all those issues, I have tried to respond to noble Lords, to recognise their expertise and to see where there can be a meeting of minds. But there are issues of principle involved; this is one of them.

Lord Higgins: My Lords, the Minister knows the position that I have set out, but for the first time she has used the word "guarantor". Given her position, is it not wholly inappropriate that Ministers in another place have repeatedly used the expression that the system "guarantees" the position of pensioners? She, this House and I recognise that that is not so. Can she have a word with Ministers at the other end and tell them that they simply must stop doing that, if she is to maintain the position that she is setting out?

Baroness Hollis of Heigham: My Lords, I take the noble Lord's point. I do not have the words of my honourable and right honourable friends from the other place before me, but I do not want to be tempted into a linguistic debate on what was said at the other end. I would like to deal with the amendments tabled today.
	The first reason for resisting the amendment is that it would undermine the founding principle of the Pension Protection Fund and the Fraud Compensation Fund as compensation for members of occupational pension schemes. Those schemes should be funded by the people who in future may benefit from that compensation. It would not be appropriate to ask the taxpayer to finance such compensation.
	The amendment would also change the nature of the PPF as an independent, non-departmental public body. To allow the board to request loans from the Secretary of State would seriously erode the arm's-length principle. I sense some picking and choosing on the part of noble Lords on the Benches opposite about where they want the Government at arm's length and where they do not. That would certainly have negative consequences. For a start, if the board could come to the Government for a loan, it would cease to be fully accountable for the financial management of the fund. It was apparent in our previous debate that members want the money to come but to preserve entire independence. The board's independence could too easily be undermined by others complaining that it should always take the apparently easy option of borrowing funds from government rather than making its own financially more appropriate decisions to change levy rates or borrow commercially.
	Secondly, if the board borrowed money from government, it would be very difficult for the Government to enforce repayment of the loans, especially if it appeared that by seeking repayment the Government were forcing a rise in levies or a reduction in compensation. It would not be right for government to surrender control of taxpayers' money in that way.
	Finally, some employers may be led to believe that, because the PPF is backed by government, it does not matter how many schemes end up in the PPF. We would thus create the problems of moral hazard that we seek to overcome. They therefore may not take full responsibility for their pension promises. In that way, the amendment would undermine the PPF's aim of restoring confidence in occupational pension schemes. An example that I have used ad nauseum is that, as ever, I have argued very fiercely on occasion with Members of my own side that the Government should make health payments for asbestosis. That would be fine, except that if the employer made no contribution and knew that the Government would pick up the bill, one can be sure that no employer would ever secure their properties against asbestos. There is an issue about where responsibility lies.
	The noble Lord, Lord Oakeshott, asked me about the Pool Re insurance scheme. Pool Re was set up in 1993 to ensure that terrorism insurance would continue to be available, following the withdrawal of insurers from provision of terrorism insurance for commercial property. Therefore, the Treasury came in as the re-insurer of last resort for Pool Re, protecting it in the event that it exhausted all its financial resources following claim payments. The Government recognise that there are circumstances in which they have a role as re-insurer of last resort to prevent or mitigate market failure where there is a substantial public-policy interest in pooling risk, and where the market is currently unable to provide insurance. In that situation, the market could not provide the insurance therefore the Government took over the risk.
	The noble Baroness, Lady Noakes, asked what assumptions the Government had made about the flow and the likelihood of such severe bunching that a crisis could arise. The estimate of the amount that the PPF needs to collect to meet its liabilities has been based on actuarial modelling of PPF finances over the next 20 years, given a range of assumptions about several factors, including pension schemes, funding levels and rates of insolvency. It includes an assumption of at least one big FTSE 100 company going bust every five years—around one company in every 250 possibly going under. We anticipate that 0.04 per cent of all DB-scheme sponsoring employers could go insolvent in each year. That is based on GAD analysis of historical data.

Baroness Noakes: My Lords, I did not mean to ask what assumptions had been made or what stress-testing the Government had done of the assumptions. I tried to ask what the Government thought would happen if a crisis arose.

Baroness Hollis of Heigham: My Lords, it depends on what one means by "crisis". I have seen the detailed research, and based on our model we think that, to start with, the PPF will have the assets of the underfunded schemes coming into the fund. Such schemes will bring with them what there is, even though there may be insufficient assets to meet the PPF level of support; otherwise they would stay outside and wind up. Secondly, they will have the power to raise the levy and to take commercial loans to deal with situations where even a major company scheme might go under. The liabilities only fall in over time. There is no suggestion that the PPF is buying annuities to top up for potential responsibilities. It will pay it as though it were a pension fund, with the liabilities falling in over time.
	As the noble Baroness will be aware, although in an average company, depending on what it does and how long it has existed, a certain proportion of staff members will be existing pensioners, others will be active members well short of retirement age, who may go on to other jobs. A very high proportion will be deferred pensioners for whom liabilities will not fall in for 10, 20 or 30 years, or possibly longer.
	Given all those assumptions and modelling; given the assets that will come in, given the levy; and given the falling in over time of the liabilities and responsibilities to be met, we are confident, even if there was significant pressure by virtue of the collapse of a couple of major companies in a particular sector—as I say, I have gone over some of the research on this—that our assumptions here are sound and should be able to deal with the sort of crises that the noble Baroness envisages.
	The noble Lord, Lord Fowler, looks as though he wants to come in. But, as I say, we are on Report.

Lord Fowler: My Lords, perhaps I may add a supplementary to that. Having said what she has said, if there is such a crisis that would—or should—involve the intervention of the Government, is the Minister really saying that under no circumstances will the Government intervene? In other words, having set up this fund, at no stage in the future are the Government prepared to stand behind it.

Baroness Hollis of Heigham: My Lords, the whole push of what I have said is that the Government are making very clear that they are not coming in as a lender of last resort to the PPF. I have been pressed on the circumstances under which they might. I have been told about a crisis; although I have been given no details of what such a crisis might be. But, even in the situation that the noble Baroness, Lady Noakes, might have in mind, the structure that we have set up, including the power to go for commercial loans and the power, if necessary, to reduce compensation levels, will be available to the PPF. Noble Lords will know that there are assets, there are levies, there is the capacity to raise commercial loans and wipe out indexation temporarily before restoring it again, as well as finally being able to reduce compensation levies.
	Therefore, in all our modelling—subject to the meteor hitting the earth type of scenario—I cannot conceive of a circumstance in which the situation envisaged by the noble Baroness is such that there would be no alternative funding available and such that only the Government could come into play.
	Given that, perhaps I may emphasise that the PPF will already have the appropriate power to borrow commercially, as provided by Clause 113. It is normal and appropriate for an independent NDPB to be able to borrow commercially to cover short-term liquidity problems. Throughout all of this, noble Lords are talking as though suddenly the whole bundle of liabilities will hit the PPF and will have to be paid out within a six-month period. That is a profound misconception of how the PPF's liabilities will be discharged. For example, two companies may hit the PPF in six months, but the liabilities will be discharged over 30 years. That is why there should not be the funding crisis of the sort described by the noble Baroness. As I say, the board will be able to manage its resources, if necessary, by going for a commercial loan.
	I repeat, if we did go down that path—the noble Lord, Lord Higgins, mentioned this—we would genuinely inflate the problem of moral hazard. If it is believed that the Government could act as guarantor, employers would act in the assumption as though the Government will be guarantor, with all of the sad consequences that we do not want to see.
	We know from OPRA that some companies are already seeking to arrange their affairs in order to make use of PPF potential funding, and so on. We should not assume that all companies will act in the most honourable way when they are seeking, quite possibly legitimately, to protect jobs. They may think that the best way of doing that is to offload some of their liabilities, including pension liabilities. We have to ensure that that balance is properly maintained in the interests of both levy payers and taxpayers. So there is a real moral hazard issue, which should not be lightly dismissed by Members opposite.
	There is also a very real problem about who pays and who gains. I repeat: we would be asking taxpayers to fund the insurance for DB private-sector members. Who are the people who do not have the benefit of occupational pension schemes? They are those whose earnings are, on average, half—I repeat, half—of those who are in jobs that attract a DB final salary scheme. We would be asking taxpayers without occupational pensions and with, on average, half the earnings of those who are in DB schemes to help to fund the insurance for the benefit of those other people but from which they as taxpayers gain no advantage. That money will go from the low paid to the better off; from the relatively financially unsuccessful to the more successful; from the self-employed—half of whom earn less than £11,000 a year but pay taxes—to those in employment; and from women to men.
	This is a regressive form of redistribution. Tenants in rented accommodation would not be asked to pay the building insurance in a pooled scheme for those who are owner-occupiers as well. People who do not own cars would not be asked to pay for the pooled risk of motor insurance, and so on. One would not do that; nor do I think that it should be done here. It would very clearly be the part-time employed, the self-employed, women and the low paid who would be asked to subsidise and fund potentially, through the PPF, the pensions of people who are in much better financial positions to look after themselves than they may be. That is wrong. It is not just inappropriate, but wrong.
	There is a real moral hazard issue as regards the employer. There is a real problem of who pays and who gains, as well as the fact that in our view the capacity to go for commercial loans, and so on, would produce—in all of our modelling—the resources necessary for the PPF to meet its obligations and its liabilities as they gradually fall in over time. I hope that your Lordships will not support the amendment.

Lord Oakeshott of Seagrove Bay: My Lords, I thank the noble Baroness for that clearly heartfelt response. I respect the sincerity in which she gave it. We explored these issues at some length on Second Reading and in Grand Committee. I propose to make only two brief points. I thank the Minister for explaining how the Government see the position of the Pool Re insurance scheme. Perhaps I may say that that exactly makes my point. As I heard her say it, they stand to prevent or mitigate market failure in areas where there is a substantial public interest in so doing. It seems to me that possible collapse of the pension protection fund would be just that situation and very similar to one where there is a sort of systemic financial collapse in the banking system.

Baroness Hollis of Heigham: My Lords, as regards terrorism and the Pool Re scheme, first, commercial companies could not get insurance: there is no evidence that PPF could not get a commercial loan. Secondly, terrorism acts can hit anyone—absolutely anyone. Here, we are talking about a minority section of the population—the better paid—who are in DB schemes. On both of those grounds, I hope that the noble Lord will accept that there is no read across.

Lord Oakeshott of Seagrove Bay: My Lords, the noble Baroness has made her points fairly. I quite take the point made by the noble Lord, Lord Higgins, about the Pension Benefit Guarantee Corporation. I suppose it was rather silly of me not to pray in aid something done by America to try to encourage the Government to follow.
	I particularly thank my former colleague the noble Lord, Lord Lucas, and my neighbour the noble Lord, Lord Fowler—I look forward to buying him a drink in the Seaview Hotel this weekend if he is down there—for their support. But this is a very serious issue. Clearly, there is a division between us. I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 137) shall be agreed to?
	Their Lordships divided: Contents, 59; Not-Contents, 108.

Resolved in the negative, and amendment disagreed to accordingly.
	Clause 119 [Insolvency event, insolvency date and insolvency practitioner]:
	[Amendment No. 138 not moved.]
	Clause 124 [Eligible schemes]:

Baroness Hollis of Heigham: moved Amendment No. 139:
	Page 89, line 15, leave out "In" and insert "Subject to the following provisions of this section, in"

Baroness Hollis of Heigham: My Lords, this group of government amendments makes adjustments to Clause 124, entitled "Eligible schemes", and Clause 135, entitled "Board to act as creditor of the employer".
	The first amendment to Clause 124 will enable regulations to prescribe that a scheme is to be treated as an eligible scheme when it would otherwise lose its eligibility status during an assessment period. That is necessary to enable all the subsequent provisions to apply.
	The second amendment to Clause 124 introduces a regulation-making power to exclude schemes from the PPF, including the requirement to pay the levy in certain circumstances. We shall use that power to exclude schemes when, outside an assessment period, the scheme trustees have compromised the Section 75 debt, and when such an arrangement means that members would receive less than the current PPF level of benefits.
	The final amendment is to Clause 135 and is linked to the amendment on compromise agreements. This amendment will ensure that the board will have no more power than the trustees would have had in any insolvency arrangement with the employer. It has been introduced following an opposition amendment tabled in Committee and further consultation with the Institute of Chartered Accountants in England and Wales.
	We have again responded to the debate in your Lordships' House and have brought forward what we hope is an appropriate amendment, one that has been tabled very much in response to our Committee discussions. I hope that noble Lords understand the intention behind these amendments and I urge their acceptance. I beg to move.

Lord Higgins: My Lords, these provisions certainly do arise from our previous discussions. However, when the noble Baroness speaks of a "compromise agreement", is she referring to what is normally known as a Bradstock agreement?

Baroness Hollis of Heigham: Yes, my Lords. Bradstock is what I would think of as a classic compromise agreement.

On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendment No. 140:
	Page 89, line 21, at end insert—
	"(3) Regulations may provide that where—
	(a) an assessment period begins in relation to an eligible scheme (see section 130), and
	(b) after the beginning of that period, the scheme ceases to be an eligible scheme,
	the scheme is, in such circumstances as may be prescribed, to be treated as remaining an eligible scheme for the purposes of such of the provisions mentioned in subsection (4) as may be prescribed.
	(4) Those provisions are—
	(a) any provision of this Part, and
	(b) any other provision of this Act in which "eligible scheme" has the meaning given by this section.
	(5) Regulations may also provide that a scheme which would be an eligible scheme in the absence of this subsection is not an eligible scheme in such circumstances as may be prescribed."
	On Question, amendment agreed to.
	Clause 127 [Applications and notifications for the purposes of section 126]:

Baroness Turner of Camden: moved Amendment No. 141:
	Page 91, line 16, leave out "and" and insert "or
	(b) that employer would be unlikely to continue as a going concern unless the trustees agree to waive any debt owed by that employer to the scheme, and"

Baroness Turner of Camden: My Lords, this amendment has been tabled in my name and that of my noble friend Lady Gibson of Market Rasen. The situation the amendment addresses is where trustees propose to reach an agreement with the employer to waive a debt owed to them, enabling the employer to stay solvent.
	The situation could arise where an employer, unable to fund the pension scheme, puts forward a proposal whereby the scheme will wind up in deficit. Ordinarily, that would trigger an obligation on the part of the employer to make up the deficit under Section 75 of the Pensions Act 1995, but the employer cannot afford to meet it. Under the agreement which it reaches with the trustees, this debt is waived in whole or in part, the scheme winds up with an unmet deficit and benefits are cut. Waiving the debt, however, means that the employer is saved and no insolvency proceedings are needed.
	This situation is possibly not covered in the Bill as drafted. To fall within Clause 125, which requires the PPF to take responsibility for the scheme, the employer must be insolvent. To fall within Clause 127, which enables the trustees to call in the Pension Protection Fund, they must be satisfied that the employer is unable to meet its debts. Arguably, the trustees could refer the scheme to the board under this section on the basis that the employer is unlikely to be able to continue as a going concern, the requirement of Clause 127, unless the trustees are prepared to let it.
	Clause 127 deals with the situation where the trustees are obliged to apply to the board of the PPF for the board to assume responsibility for the scheme. This amendment extends the obligation to the situation where the trustees form the view that the employer can be saved only if the trustees will agree to waive the debt owed by the employer. They would then have the obligation to make an application to the board for the board to assume responsibility. That would not require the trustees to cease discussions with the employer. Recent experience shows that a compromise can be reached with the employer which will deliver better benefits than perhaps might be provided by the PPF. In other words, the trustees could put the board on notice, and the board should consider whether to take the scheme under its wing. An assessment period commences and the board must consider whether a scheme rescue would be possible. The trustees are not prevented from continuing negotiations which might produce a better out-turn for members than the PPF will deliver.
	As we know, the Government agreed to an earlier amendment of mine that one half of the trustees should be employee trustees. We expect that those trustees will have an opportunity to receive appropriate training. I am grateful for that concession on the part of the Government because I am certain that properly trained employees will take into consideration all the benefits accruing to scheme members as well as the interests of both scheme members and employees generally. I beg to move.

Lord Higgins: My Lords, it may be that the noble Baroness is anticipating later amendments on trustees and member trustees. However, what is not clear from the case she is now putting forward is its relationship to the debate we had the other day on the moral hazard clauses so far as concerns the clearance procedure. I understood the suggestion to be that in certain circumstances the board or the trustees might apply for clearance. Perhaps, in her reply, the Minister could make clear what the situation is.

Lord Lucas: My Lords, what interests me about this amendment is whether in order for a scheme to get into the fund, the employer has to go through the process of receivership—with all the damage that that implies for the business and employment prospects—or whether it is possible for a scheme to be accepted into the fund through some other form of restructuring. Such a restructure would certainly destroy all the shareholder value, but would not destroy the business in the same way as receivership. While the shareholders would come out with nothing—so there is no incentive for them to encourage kicking the scheme into the fund—I wonder whether the events that the company must go through in order for the scheme to go into the fund do not have to be those of receivership. Rather, it could be done through administration. That is so much better both for the business and for the continuing employees. I am anxious to understand the point and I support the noble Baroness, Lady Turner, in looking for that.

Baroness Hollis of Heigham: My Lords, what has been reflected by the speeches made in support of the amendment and in moving it suggests a misunderstanding of exactly what the amendment would do.
	Clause 127 provides for those schemes whose sponsoring employers are unable to become insolvent using the definitions in Clause 119, such as public bodies whose pension schemes do not have a Crown guarantee. I refer to the Arts Council, British Waterways and so forth. Because those employers are technically unable to become insolvent, they are therefore unable to trigger the start of an assessment period even when the body is clearly not continuing as a going concern. However, the remarks of the noble Lord, Lord Lucas, envisaged a different effect.
	The amendment tabled by my noble friend would enable schemes such as I have described to apply to the board if they believed the employer would become insolvent unless the trustees waive the debts owed to the pension scheme. I assume that the intention of my noble friend's amendment was to enable all schemes to apply to the board, whether or not the employer would be subject to insolvency events as defined in Clause 119, but where the trustees waiving the debt—possibly as part of a compromise agreement—would enable the employer to avoid insolvency and therefore continue as a going concern. The practical effect of this would be for the PPF to have to determine whether or not an employer would have been able to continue as a going concern had a compromise agreement not been met. This could be very difficult to determine and might be open to manipulation.
	However, I share my noble friend's concerns about the jobs of people whose employers are in serious financial difficulty due to the debt owed to their pension schemes and the concern that members of those schemes should receive at least the PPF level of benefits. I believe that we already have mechanisms in place to enable businesses to continue as going concerns, thus saving people's jobs, while also ensuring that pension scheme members receive at least the PPF level of benefits.
	I should like to remind noble Lords of previous debates in Committee on compromise agreements, on which I was pressed by the noble Lord. As I mentioned during that debate, where a company is in such financial difficulty that it is not possible to put in place a recovery plan for the pension scheme, it will be possible for the scheme to enter into a company voluntary arrangement, a CVA. This is a form of business rescue designed to keep an employer continuing as a going concern.
	The calling of creditors for a CVA is also an insolvency event as defined in Clause 119; as such it will trigger the beginning of an assessment period. If a company were to set up a successful CVA, which we would hope, the employees would be able to keep their jobs and the members of the associated pension scheme would receive at least the PPF level of benefits.
	I hope I am able to give my noble friend the assurances she seeks. But we believe it is more appropriate for compromise agreements to take place as part of a formal administration, or a CVA to ensure entry into the PPF, rather than leaving it to the board to determine which compromise agreements would make a scheme eligible for entry to the PPF. My noble friend's amendment as it stands addresses a problem which is quite limited. I suspect she and the noble Lord, Lord Lucas, were concerned about the wider issues raised so I have trespassed beyond the scope of the amendment to seek to answer them. I hope that I have answered any queries but if not, I am happy to return to them.
	The noble Lord, Lord Higgins, raised a query about clearance. Clearance is in case of avoidance of contribution notices and financial support directives from the regulator. It is not directly related to PPF eligibility.

Baroness Turner of Camden: My Lords, I thank my noble friend for that response and other noble Lords who have contributed to the debate, including the noble Lord, Lord Lucas. It was the intention to try to deal with a situation where otherwise jobs would be lost. The intention was to try to maintain a company in existence as an employer of the members of the pension scheme. As I said earlier, I am quite confident that trustees who were properly trained would act responsibly in that respect. However, I do acknowledge that there could be difficulties to which my noble friend has responded. I shall study very carefully what she has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 135 [Board to act as creditor of the employer]:

Baroness Hollis of Heigham: moved Amendment No.142:
	Page 97, line 38, leave out subsections (4) to (6).
	On Question, amendment agreed to.
	Clause 141 [Board's obligation to obtain valuation of assets and protected liabilities]:

Baroness Hollis of Heigham: moved Amendment No. 143:
	Page 103, line 12, at end insert—
	"(2A) For those purposes, regulations may provide that any of the following are to be regarded as assets or protected liabilities of the scheme at the relevant time if prescribed requirements are met—
	(a) a debt due to the trustees or managers of the scheme by virtue of a contribution notice issued under section 39, 46 or 54 during the pre-approval period;
	(b) an obligation arising under financial support for the scheme (within the meaning of section 45) put in place during the pre-approval period in accordance with a financial support direction issued under section 43;
	(c) an obligation imposed by a restoration order made under section 51 during the pre-approval period in respect of a transaction involving assets of the scheme."

Baroness Hollis of Heigham: My Lords, in moving Amendment No. 143, I shall speak to the other amendments grouped with it. I shall be brief but I shall seek to answer any particular queries that noble Lords may have.
	This group of amendments amends Clause 141 which sets out the board's obligation to obtain a valuation of assets and protected liabilities. The group also includes necessary consequential amendments to Clauses 149 and 156 in order that they are made consistent with amended Clause 141.
	These amendments ensure that the valuation will take account of any contribution notices, financial support directions and restoration notices imposed by the regulator using its moral hazard powers. Without these amendments the PPF could be called upon to assume responsibility for schemes which, had these been taken into account, could have been wound up outside the PPF to the benefit of members. In other words, we are bringing into the balance sheet the contribution notices, financial support directions and so forth. This is consequential on the proposals we have made on the moral hazard clauses. If noble Lords wish, I could go into detail but these amendments are benign and sensible. They make sure that all assets are properly taken into account. I see that from a seated position I have the support of the noble Baroness, Lady Noakes, which reassures me enormously.

On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendments Nos. 144 to 148.
	Page 103, line 13, leave out subsection (3).
	Page 103, line 29, at end insert—
	"(4A) Regulations under subsection (4) may provide, in particular, that when calculating the amount or value of assets or protected liabilities of an eligible scheme at the relevant time which consist of any of the following—
	(a) a debt (including any contingent debt) due to the trustees or managers of the scheme from the employer under section 75 of the Pensions Act 1995 (c. 26) (deficiencies in the scheme assets),
	(b) a debt due to the trustees or managers of the scheme by virtue of a contribution notice issued under section 39, 46 or 54,
	(c) an obligation arising under financial support for the scheme (within the meaning of section 45) put in place in accordance with a financial support direction issued under section 43, or
	(d) an obligation imposed by a restoration order made under section 51 in respect of a transaction involving assets of the scheme,
	account must be taken in the prescribed manner of prescribed events which occur during the pre-approval period."
	Page 103, line 30, leave out "those matters" and insert "the matters mentioned in paragraphs (a) and (b) of that subsection"
	Page 103, line 37, at end insert—
	"( ) Nothing in subsection (2) requires the actuarial valuation to be obtained during any period when the Board considers that an event may occur which, by virtue of regulations under subsection (2A) or (4), may affect the value of the assets or the amount of the protected liabilities of the scheme for the purposes of the valuation."
	Page 104, line 1, leave out "In this section" and insert "For the purposes of this section—
	(a) "actuarial valuation", in relation to the scheme, means a written valuation of the assets and protected liabilities of the scheme which—
	(i) is in the prescribed form and contains the prescribed information, and
	(ii) is prepared and signed by—
	(a) a person with prescribed qualifications or experience, or
	(b) a person approved by the Secretary of State,
	(b) "the pre-approval period", in relation to the scheme, means the period which—
	(i) begins immediately after the relevant time, and
	(ii) ends immediately before the time the Board first approves a valuation of the scheme under section 142 after the relevant time,
	(c) "the relevant time"—
	(i) in a case within subsection (1) of section 125, has the meaning given in subsection (4)(b) of that section, and
	(ii) in a case within subsection (1) of section 126, has the meaning given in subsection (3)(b) of that section, and
	(d) "
	On Question, amendments agreed to.
	Clause 149 [Application for reconsideration]:

Baroness Hollis of Heigham: moved Amendment No. 149:
	Page 111, line 13, leave out from beginning to "within" in line 14 and insert "audited scheme accounts for a period which—
	(i) begins with such date as may be determined in accordance with regulations, and
	(ii) ends with a date which falls"

Baroness Hollis of Heigham: My Lords, in moving this amendment I should like to speak also to Amendments Nos. 150 to 153, 155 to 162, 207 and 219 to 221. These amendments are minor and technical. Essentially they make three changes to the Bill. First, they require the trustees to obtain a set of audited accounts when applying for reconsideration. This replaces the need for an auditor's valuation—an incorrect use of terminology about which the noble Lord, Lord Hunt, was very fierce with me. The amendments respond to concerns raised in Committee and after consultation with the Institute of Chartered Accountants.
	Secondly, they amend Clause 152. This clause provides that where a public service pension scheme is required to be wound up, then provision may be made, by order, to modify any enactment in which the scheme is contained. The amendment clarifies that the order may be made by the appropriate authority, which is a Minister of the Crown or government department with responsibility for the scheme in question.
	Lastly, they make a minor technical amendment to Clause 179 changing references to "the financial year" to "the period for which the levy is imposed". This is to ensure that the terminology in the clause fits with that used in Clause 172. I urge your Lordships to accept these technical amendments.

Lord Higgins: My Lords, this is a somewhat shotgun set of amendments. They seem to be aimed at various clauses all over the Bill. However, we accept that the Minister has sought to meet some points made in Committee and for that we express our appreciation. I am a little puzzled by one point the noble Baroness made in regard to the amendment which amends Clause 152—"Requirement to wind up schemes with sufficient assets to meet protected liabilities". The Minister referred to public sector schemes. I am not clear in what circumstances such schemes were being wound up. Perhaps she could elucidate further.

Baroness Hollis of Heigham: My Lords, I am just trying to think. There could be a case where a body with a pension scheme could come to an end. There might be a need to wind the scheme up if an organisation went out of existence. I was pressed on this point in Committee by the noble Lord, Lord Skelmersdale. All this does is to make it clear who has the power to do the winding up. We had some difficulty envisaging such a circumstance, but if it did occur we need the power to be able to act should such a body come to the end of its appropriate life. As I said, these are essentially public sector schemes where there is no Crown guarantee.

Lord Higgins: My Lords, the Minister is saying that it is a public sector scheme which has insufficient assets to do anything other than meet its protected liabilities. That seems very difficult to envisage.

Baroness Hollis of Heigham: My Lords, the bulk of public sector schemes—Civil Service or whatever—are underwritten by Crown guarantee. However, there are some public sector schemes which are not underwritten by Crown guarantee. They tend to be associated with non-departmental government bodies such as the Arts Council, British Waterways, the Armouries and so on. Where they have no Crown guarantee they pay the levy and are eligible for protection and therefore potentially come within the PPF. But because they could need to be wound up, somebody needs to do it. All we are doing here is saying who has to do it.

On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendments No. 150 to 156.
	Page 111, leave out lines 34 to 39 and insert—
	""audited scheme accounts", in relation to a scheme, means—
	(a) accounts obtained by the trustees or managers of the scheme ("the scheme accounts") which are prepared in accordance with subsections (8A) to (10) and audited by the auditor in relation to the scheme, and
	(b) a report by the auditor, in the prescribed form, as to whether or not such requirements as may be prescribed are satisfied in relation to the scheme accounts;
	"auditor", in relation to a scheme, has the meaning given by section 47 of the Pensions Act 1995 (c. 26);"
	Page 111, line 44, leave out "date" and insert "time"
	Page 112, line 7, at end insert—
	"(8A) The scheme accounts are prepared in accordance with this subsection if, subject to subsections (9) and (10), they—
	(a) include a statement of the assets of the scheme (excluding any assets representing the value of any rights in respect of money purchase benefits under the scheme rules) as at the reconsideration time, and
	(b) are prepared in accordance with such other requirements as may be prescribed."
	Page 112, line 7, at end insert—
	"(8A) The scheme accounts are prepared in accordance with this subsection if, subject to subsections (9) and (10), they—
	(a) include a statement of the assets of the scheme (excluding any assets representing the value of any rights in respect of money purchase benefits under the scheme rules) as at the reconsideration time, and
	(b) are prepared in accordance with such other requirements as may be prescribed."
	Page 112, line 8, after "section 141" insert "(other than regulations made by virtue of subsection (4A) of that section)"
	Page 112, line 9, leave out from "to" to "as" in line 10 and insert "the scheme accounts"
	Page 112, line 12, leave out from "provide" to end of line 18 and insert "that, where an asset of a prescribed description has been acquired during the assessment period, the value assigned to the asset as at the reconsideration time is to be determined, for the purposes of the scheme accounts, in the prescribed manner."
	On Question, amendments agreed to.
	Clause 150 [Duty to assume responsibility following reconsideration]:

Baroness Hollis of Heigham: moved Amendments Nos. 157 to 160.
	Page 112, line 36, leave out "date" and insert "time"
	Page 112, line 39, after "amount" insert "at that time"
	Page 112, line 41, at end insert "at that time"
	Page 113, line 24, leave out subsections (9) to (11) and insert—
	"(9) The Board may—
	(a) for the purposes of subsection (2), obtain its own valuation of the assets of the scheme as at the reconsideration time (within the meaning of section 149), and
	(b) for the purposes of subsection (2)(b), obtain its own valuation of the liabilities of the scheme as at that time;
	and where it does so, subsections (8A)(b), (9) and (10) of section 149 apply in relation to the valuation as they apply in relation to the scheme accounts (within the meaning of that section).
	(10) Regulations under subsection (4) of section 141, and guidance under subsection (5) of that section, apply for the purposes of this section in relation to the estimated costs within subsection (2)(c) as they apply for the purposes of section 141 in relation to protected liabilities within section 129(1)(c)."
	On Question, amendments agreed to.
	Clause 152 [Requirement to wind up schemes with sufficient assets to meet protected liabilities]:

Baroness Hollis of Heigham: moved Amendments Nos. 161 and 162:
	Page 116, line 42, leave out "provision may be made by order" and insert "the appropriate authority may by order make provision"
	Page 116, line 43, at end insert—
	"( ) In subsection (14) "the appropriate authority", in relation to a scheme, means such Minister of the Crown or government department as may be designated by the Treasury as having responsibility for the particular scheme."
	On Question, amendments agreed to.
	Clause 156 [Duty to assume responsibility for closed schemes]:

Baroness Hollis of Heigham: moved Amendments Nos. 163 to 166:
	Page 119, line 36, leave out "141(3)" and insert "141"
	Page 119, line 37, at end insert—
	"(3A) Subject to subsection (5), subsection (2A) of section 141 applies for those purposes as it applies for the purposes mentioned in subsection (2) of that section (and the definitions contained in paragraphs (b) and (d) of subsection (9) of that section apply accordingly)."
	Page 119, line 41, after "(9)" insert "(b) and (d)"
	Page 120, line 1, leave out from first "of" to "applies" in line 2 and insert "sections 141 and 143 by virtue of subsection (3A) or (4)—
	(a) subsections (2A), (4A) and (9)(b) and (d) of section 141 apply as if the references to "the relevant time" were references to that term as defined in subsection (7) below, and
	(b) subsection (2) of section 143"
	On Question, amendments agreed to.
	Clause 160 [The pension compensation provisions]:

Baroness Hollis of Heigham: moved Amendment No. 167:
	Page 122, line 33, leave out from "of" to end of line 34 and insert ", and the provisions made by virtue of, this section, sections 138 to 140, 159(2)(c), 162 and 166 and Schedule 7."

Baroness Hollis of Heigham: My Lords, in moving Amendment No. 167, I shall speak also to Amendments Nos. 168 and 205, which affect an area of future proofing.
	Schemes are now moving away from traditional benefit schemes and exploring ways in which they can share the risk with employees and yet still offer an attractive pension scheme. As a result, we are seeing new scheme designs, and these amendments will allow us to respond to them. This small group of government amendments to Clause 160, "The pension compensation provisions", and Schedule 7, "Pension compensation provisions", enables us to deal with defined benefit schemes which are transferred to the PPF but have differing characteristics—for example, cash balance schemes.
	Cash balance schemes are eligible schemes for the purpose of Clause 124 but have slightly different characteristics. As your Lordships will know, under a cash balance scheme members are entitled to a pension based on their having a cash sum available at retirement which is typically expressed as a percentage of salary for each year of service and with some guaranteed revaluation. Subject to any allowance for a tax-free lump sum, this cash sum is then converted to a pension by securing an annuity either with an insurance provider or within the plan, possibly on guaranteed terms. So, although the pension is defined in relation to a cash sum—like a normal money-purchase scheme—the cash sum itself is guaranteed; in other words, all investment risk remains with the employer.
	While it has always been our intention—and I am sure your Lordships will endorse this—that these schemes would be covered by the PPF, as a result of their complexity we need to amend Clause 160 and Schedule 7 to enable payment of compensation to cash balance scheme members. This allows the provisions specified in Schedule 7 to be tailored by regulations to work satisfactorily in such cases which are not the norm—for example, the paragraphs relating to postponed and deferred members would need some modification in their references to "protected pension rates". This avoids overcomplicating those provisions by including the modifications on the face of the Bill.
	I hope your Lordships will agree that these amendments are vital to ensure that the members referred to are paid the appropriate amount of compensation because the board of the PPF has assumed liability and responsibility for their scheme. I therefore ask your Lordships to accept the amendments. They are totally benign and seek to ensure that people are not inadvertently left out of protection as schemes increase the variety of ways of offering pensions beyond the conventional polarity between DB and DC schemes. I beg to move.

Lord Higgins: My Lords, perish the thought that anything in this legislation is complicated. If the noble Baroness says that we shall have to go further on this group of amendments because the matter is complicated, then it must be totally incomprehensible.
	Be that as it may, she has referred to statutory instruments and so on, and in earlier debates she has helpfully said that she will provide us with the relevant statutory instruments. She has always been extremely helpful in previous legislation by seeking to publish regulations in draft form so that we could consider them before we finally let the Bill pass. Perhaps she will at some stage in the proceedings give an indication of what progress she has made in that respect and whether she can—ahead of Third Reading, at any rate, and some little time before that—provide the regulations that she considers most crucial and which we both most need to know about before we let the Bill go through.

Lord Oakeshott of Seagrove Bay: My Lords, I am happy to accept the Minister's assurance that these government amendments are benign—although it does raise a question about what the other government amendments are like. However, we certainly accept the benign assurance.

Baroness Hollis of Heigham: My Lords, to my pleasure, apparently the draft regulations are ready now. I shall ensure that noble Lords receive them tomorrow.

On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendment No. 168:
	Page 122, line 35, after "include" insert "any provision of, or made by virtue of,"
	On Question, amendment agreed to.

Baroness Farrington of Ribbleton: My Lords, I beg to move that further consideration on Report be now adjourned. In moving this Motion I suggest that the Report stage begin again not before 2.15 p.m.

Moved accordingly, and, on Question, Motion agreed to.

National Assembly for Wales (Transfer of Functions) Order 2004

Lord Evans of Temple Guiting: rose to move, That the draft order laid before the House on 11 October be approved [30th Report from the Joint Committee].

Lord Evans of Temple Guiting: My Lords, the draft National Assembly for Wales (Transfer of Functions) Order 2004 must be made by Order in Council following approval of the draft order by both Houses of Parliament. That is why this short and, I hope, uncontentious order is before the House today. All political parties in the Assembly have agreed policy on these issues.
	Turning to the draft order, five functions will be transferred as a result of the approval of the draft order by this House. First, the most significant transfer to be effected by this order is the transfer to the Assembly of those animal health and welfare powers which at present remain with the UK Government.
	The case for this transfer has its genesis in the outbreak of foot and mouth disease in 2001 which gave rise to some practical difficulties and public confusion about who was responsible for controlling the disease. This brought into sharp focus the contradiction between the political accountability which the Assembly assumed in this matter for which it did not have legal responsibility.
	The order will simplify matters by ensuring that the Assembly has clear legal accountability for all animal health and welfare matters. It will enable the Assembly to act and make secondary legislation across the range of the Animal Health Act and related provisions, and thus give the Assembly a comparable level of responsibility for subordinate legislation as already exists in Scotland.
	Briefly, the order identifies the following general powers for transfer: orders to control animal disease; cleansing and movement of animals; transport of animals, including import and export; slaughter and disposal of animals; licensing of slaughterhouses; prevention and eradication of certain diseases in sheep; control of pests and diseases affecting bees; and imposition of levies and compensation related to diseases in pigs.
	We must remind ourselves that disease is no respecter of boundaries. While the proposed transfer provides for greater scope for independent action, I can assure the House that the Assembly is committed to working within the GB-wide disease control area. It recognises that whatever action is taken in Wales needs to fit in with what is happening elsewhere in Great Britain. Indeed, as an example of this commitment, the Assembly has worked tirelessly with the UK Government and the Scottish Executive to produce the animal health and welfare strategy published in June this year.
	There are four other functions included in the order. The first will enable the Assembly to set fees payable to local authorities in Wales for local land charges and personal searches. At present these functions lie with my noble and learned friend the Lord Chancellor. For England, the Government have signalled their intention to devolve most of them to individual local authorities. But the Assembly has oversight of Welsh local government. It wishes to see a consistent approach to fee setting across Wales and it is right that we should agree to its request that the fee-setting function be transferred to it in relation to Wales.
	The order will also give the Assembly the power to decide whether items of artistic or historical interest in Wales should be accepted under the highly successful acceptance in lieu of inheritance tax scheme. The National Assembly for Wales (Transfer of Functions) Order 1999 gave the Assembly power to allocate such items to museums and galleries in Wales, and it clearly makes sense for the power to accept items which are located or will be displayed in Wales to be exercised in tandem with this. It will also enable the Assembly to make regulations governing the notice periods in Wales for removal of abandoned vehicles by the police.
	Finally, the order will correct an anomaly in the Assembly's powers to set threshold levels for water industry inset appointments in Wales. It might help if I explain that inset appointments arise when a relatively large customer exercises its right to purchase water and sewerage services from a company other than the water undertaker for its area.
	The Water Industry Act sets the threshold for inset appointments. These are: 250 million litres if the area of the undertaker concerned is wholly or mainly in Wales, and 100 million litres in all other cases.
	Under Sections 7 and 158 of the Act, lower figures can be substituted for these thresholds, and both powers have to be exercised at the same time. These powers have been transferred to the Assembly. To encourage greater competition among water suppliers, the Assembly now plans to reduce the Welsh threshold from 250 million litres to the English level of 100 million litres. However, the Section 7 power was transferred in respect of,
	"any water or sewerage undertaker whose area is wholly or mainly in Wales",
	while that in Section 158 was transferred "in relation to Wales".
	The areas of water companies are based on river catchments, so they are not coterminous with the national boundary between England and Wales. So the area over which the Assembly can exercise the two powers needs to be brought into line, and that is the effect of the order.
	The Wales Office has worked closely with, and got the complete agreement of, all the relevant departments—Defra, DCA, DCMS and, of course, the Assembly. A debate took place yesterday on this order in the other place and approval was given to it. I commend the order to the House.
	Moved, That the draft order laid before the House on 11 October be approved [30th Report from the Joint Committee].—(Lord Evans of Temple Guiting.)

Lord Roberts of Conwy: My Lords, I am sure we are all most grateful to the Minister for his clear and succinct presentation of the order to the House. My criticism is in no way personal; it is of the system which occasions and produces recondite and obscure orders of this kind.
	As the noble Lord explained, the order transfers selected powers and functions to the National Assembly from some eight Acts of Parliament and three statutory instruments to complement the veritable plethora of functions already transferred, notably under the 1999 transfer order.
	A compendium of the Assembly's powers and functions should now be compiled so that Assembly Ministers and Members—indeed, everyone—know where matters stand. This is essential for good governance, and urgently required in my view. I say this with total confidence because those professional and academic lawyers who have studied the Assembly's functions confess that even they are uncertain and confused over what the Assembly can and cannot do.
	Some of your Lordships recently had an opportunity to hear Mr David Lambert, a former civil servant on the legal side in the old Welsh Office for many years and now a research fellow in public law at Cardiff University. He was talking about the problems and uncertainties related to transferred functions. He also spoke of possible solutions for the future.
	There is a wide range of views on this issue. My belief is that whatever is proposed, a compendium of existing powers and functions, spelling out exactly what the Assembly can and cannot do, is urgently needed as a basis for future consideration and a guide for all concerned. I hope that the Government will give it serious consideration.
	Four of the Acts referred to in this order and three sets of regulations relate to animal health and welfare and, as the Explanatory Memorandum states, the transferred functions in the order are,
	"intended to give the Assembly a level of responsibility for such matters which is equivalent...to that of the Scottish Executive".
	The case for a transfer was indeed first brought into sharp focus by the foot and mouth outbreak of 2001. Mr Carwyn Jones, the then countryside Minister in the Assembly Government, said of that devastating episode that,
	"the Assembly found it difficult to reconcile the contradiction implicit in having political accountability for matters for which legal responsibility had not been devolved".
	Incidentally, I think we would all agree that he conducted himself extremely well in very difficult circumstances, and earned plaudits all round.
	How certain can we be that, after this transfer, the Assembly is fully empowered to deal properly with a similar crisis in agriculture in future? It would certainly seem to be now in a position to implement the Welsh element of the country-wide animal health and welfare strategy developed after the outbreak and published in June of this year. But crises seldom replicate past events exactly, and there is an argument for giving the Assembly a general power within primary legislative measures to do anything consistent with the purpose of the measure if the need arises. It is a point that the Government have already taken on board in various Acts, but it requires further thought and attention, with a view to refinement and standardisation.
	The change proposed in the order to give the Assembly the function currently belonging to the noble and learned Lord the Lord Chancellor, of setting fees related to local land registers, arises from the proposal to devolve the function to local authorities in England. The proposal appeared in the Government's White Paper of 2001, Strong Local Leadership—Quality Public Services, but, like so much else promised by the Government, that has not yet been implemented. Be that as it may, the proposal in Wales is that the fee setting should be done by the Assembly Government rather than local authorities. The question of why devolution should stop at the Assembly was raised at the Assembly's discussion of this document on 13 July this year. The reply was given that Edwina Hart, the Assembly Government's finance Minister, had decided that there should be national rates in Wales and that local authorities should not be allowed to determine their own fees. I am glad to say that Conservative policy in England is to devolve the function to local authorities, and this is supported, for sound reasons, by the Local Government Association. I cannot see us changing our view on the Welsh scene.
	Fees of this kind should reflect the costs to the local authority of recording the information and providing it to interested parties. It is to be hoped that fees will not be exploited and developed into a form of taxation. When the fees are set by the Assembly, I hope that they will be debated to ensure that they are set at a reasonable level, commensurate with local authority costs.
	The change proposed in the order relating to property surrendered in lieu of inheritance tax is technical in that it ensures that the Assembly has power to accept such property—usually of an artistic nature—from the Inland Revenue as well as deciding to which museum or gallery such items should be offered. The current low level of exemption from the tax compared with property prices is a matter of concern, as more and more estates become liable for the tax. The future consequences should be carefully watched.
	The order also provides that the Assembly has the role, in dealing with abandoned vehicles, of deciding the length of time involved before a vehicle can be so described and the period allowed for an objection to be registered. That seems eminently sensible. I hope that this particular transfer of function will lead to a burst of activity to eliminate this form of desecration from our waterways, hills and landscapes.
	Similarly, the change in the entry in the 1999 transfer of functions order relating to the Water Industry Act 1991 and the removal of an inconsistency in the way that two related powers are exercisable by the Assembly is a desirable step in the right direction. As I understand it, Section 7 of the Act refers to the appointment of water and sewerage undertakers for England and Wales as distinct geographical entities while Section 158 appears to recognise that some of the water and sewerage undertakers operate on a cross-border basis. As the Minister explained, it is a somewhat complex area that clearly has extensive repercussions. I hope that no cross-border problems will arise following our approval of this order today.
	In approving the order, we are mindful of the commission report by the noble Lord, Lord Richard, and the emphasis that it places on the need for thorough scrutiny of secondary legislation not only here at Westminster but at the Assembly too. As the Minister said, the order was debated at the Assembly in July and considered by the other place yesterday. Our own Statutory Instruments Committee also considered it and provided useful advice. Personally, I would like to record my thanks to Mr Roger Bonehill, the Government's expert on this order, for his readiness to answer my telephone queries.
	Our scrutiny at all levels would be greatly assisted if we had the compendium of Assembly powers and functions to which I referred at the beginning. It might also help us all to identify other possible gaps in the Assembly's functions and take anticipated action. I therefore reiterate my plea that the Government give the matter their urgent consideration.

Lord Thomas of Gresford: My Lords, we on these Benches also very much welcome this order. May I also express my thanks to the Minister, not only for his clear exposition of the position today, but for forwarding to those of us charged with speaking on this matter the necessary documentation that lay behind many of the comments that he has made and which are very helpful for us when we are seeking to reply?
	I echo the words of the noble Lord, Lord Roberts of Conwy, that it would be helpful if we put together a compendium, as he called it, of the powers that have now been transferred to the National Assembly. I remember that when the legislation was going through this House we were presented with enormously long schedules of powers taken from this Act or another Act. It was difficult enough at that time to comprehend precisely what powers were being transferred. As the noble Lord, Lord Roberts, said, it is difficult for academic lawyers as well as the practical lawyers employed by the Assembly to find out exactly where they stand.
	That difficulty is compounded by an additional problem that was highlighted by my honourable colleague the Member of Parliament for Brecon and Radnorshire, Mr Roger Williams, when he pointed out that although this order transfers powers relating to animal health and welfare, it does not transfer powers relating to dealing with plant diseases to the National Assembly. The reply from the Minister there was, "That is all under a memorandum of understanding". It does not transfer powers, but there is an informal arrangement whereby the National Assembly, through its officials, will act in relation to plant diseases. That is only an example of what must appertain over a wide area of public responsibility and in addition to knowing what actual powers are transferred it would be useful to compile a note of the memoranda of understanding in relation to who does what, which will also assist those, including the Assembly Members, who are trying to cope with public business in Wales.
	Coming to the specific matters referred to in the order, we welcome the fact that the power to tackle animal diseases and to deal with animal welfare has been transferred. I take it that that means that the National Assembly can decide whether to pursue a vaccination or slaughter policy in the event of an outbreak of foot and mouth disease. That is a matter of considerable concern. It was very noticeable in the last outbreak that Scotland moved very swiftly and held the line in the border counties just north of Carlisle where it is thought that the disease made an early appearance. Because it was able to move swiftly, Scotland's beef cattle in particular escaped much of the ravages of that disease.
	However, one of the powers that has apparently not been transferred is the power to give compensation in such circumstances. Supposing that the Assembly were to decide upon a policy of slaughter, it seems a little odd that it does not have the power to award compensation and that the matter should be handed over to Defra to deal with. There are distinctive agricultural practices and distinctive problems in Wales and it seems only right that, if the power of dealing with disease is in Welsh hands, the Assembly should also have the power of assessing compensation.
	On the acceptance of property in lieu of inheritance tax, I echo the noble Lord, Lord Roberts, in thanking the member of the committee for giving us information about the way that the system works. I put forward the hope that in this context, if the National Assembly does decide to accept property in lieu of inheritance tax, it does not disappear into some warehouse. Matters that are considered by the committee that determines the intrinsic value of a piece of art and its actual value in the marketplace should not be locked up but properly put on display so that the public in Wales can have the benefit of the matters that have been accepted in that way.
	I am rather relaxed about land charge fees being set by the Assembly. I have knowledge from my dim and distant past as a solicitor of dealing with local authorities. I do not think that the payment of land charge fees should be seen as a tax and to have a standard fee throughout Wales would be a good thing. It would be unfortunate if certain areas in Wales started to charge very high fees as a measure of discouraging people from buying property in that area.
	The power to remove abandoned cars is also a welcome transfer. The noble Lord, Lord Roberts, referred to the desecration of the countryside. It is true that, in parts of Wales in the uplands where I frequently walk one sees derelict cars completely abandoned. It is not only an urban problem. There is even greater desecration from the trails of motor bikes and so forth across open moorland, but that is perhaps something that we can talk about on a different occasion.
	I have tried to deal with the matters that are transferred in this order. We welcome the order, but we would welcome even more the implementation of the recommendations of the noble Lord, Lord Richard, that the power of primary legislation should be put in the hands of the National Assembly, so that it would not be necessary for these matters to be debated in Westminster at all. They could be debated by the representatives of the people of Wales who have been elected to the Assembly.

Lord Livsey of Talgarth: My Lords, as the former Member for Brecon and Radnorshire in the other place, I am aware that the critical problems that we had during the foot and mouth outbreak of 2001 were substantially caused by communication problems between London and Cardiff and people on the ground. I can only say that I wholeheartedly welcome the transfer of these functions. The noble Lord, Lord Roberts, congratulated the Agriculture Minister, Carwyn Jones, on the way in which he carried out his duties in 2001, which will make the task in future much easier. I hope and trust that that will be so.
	On the comment made by my noble friend Lord Thomas of Gresford on the compensation issue, which I believe is very important, we need to know why that provision is not included—especially as it is a subject of disputes. There are valuers on the spot who know precisely what local valuations are of sheep and cattle, so I hope that it is not simply a question of trust with regard to Wales.
	I note that all the functions under the Slaughterhouses Act 1974 will be transferred. That is to be welcomed, because of the number of small slaughterhouses in Wales, many of which have been closing. That impinges on the upgrading of these places and whether sufficient financial assistance will be available for them to do that.
	I realise that we have very limited time, but those were a few brief comments.

Lord Evans of Temple Guiting: My Lords, I thank all noble Lords who have contributed to this short debate. I shall try to answer all the questions, but if I inadvertently miss one or two out, I shall write within the next day or so.
	The noble Lords, Lord Roberts and Lord Thomas, raised the interesting question of whether there should be a compendium for all Welsh legislation. In principle, I totally agree with that idea—it is an absolutely terrific idea. As the noble Lord, Lord Thomas, said, it would be of enormous benefit to law students and people who wish to know about the constitution and devolution.
	Although I welcome the idea, I understand that the UK Government provide, through HMSO, links to all Welsh statutory instruments made by the National Assembly for Wales and to all Acts of the UK Parliament and UK statutory instruments which apply exclusively, or primarily, to Wales. It may be that one can get that information but that it is not in the user-friendly form that it should be in. I hope that noble Lords will understand that it would not be proper to discuss how the National Assembly directs its funding in this respect. However, I can say from the Dispatch Box that I believe that it is a good, sensible and actually quite necessary idea, and I hope that we can make progress on it.
	The noble Lord, Lord Roberts, asked some specific questions. He asked how certain we were that the Assembly would have the powers necessary to act on animal health and welfare matters. The Assembly is absolutely confident that the transfer of animal powers gives it the power that it requires, but of course the position does and will remain under review.
	The noble Lord, Lord Roberts, also asked about the fees for searches and so on, and wants an assurance that they will be kept at a reasonable level and will not be a device used for raising taxes. The regulations on fees will be subject to debate in the Assembly in plenary, so there will be extensive consultation before anything happens.
	When I was chairman of the Museums, Libraries and Archives Council, I was very much involved in the "acceptance in lieu" scheme, which has been a tremendous success. We must be careful not to misuse the word "property", because it does not have anything to do with buildings—it has to do with works of art and artefacts. It is brilliant that the power of approval of an object or work of art that is available is being devolved to Wales. I agree with the point made by the noble Lord, Lord Thomas, that those works of art and so on should be exhibited. I once got into terrible difficulties by arguing that the 80 per cent of materials in store in museums should be given to schools or taken out of store somehow. That is a real problem: huge amounts of our national heritage in museums are in store.
	The noble Lord, Lord Thomas, is concerned about making more available the memorandums of understanding, one of which as he rightly said was used for plant diseases. Obviously, it would be good if they could be tied in with the compendium idea, but they are already in the public domain, and copies can be obtained from the Assembly or the relevant Whitehall department. The noble Lord also asked a question about inheritance tax, which I believe I have answered.
	On vaccination policy, the answer to the noble Lord's question is that yes, in theory the Assembly could have a different policy for an outbreak of foot and mouth disease. However, as Defra is the competent authority in respect of the EU, the Assembly is committed to working within the GB-wide disease control area. As for compensation, such payments will remain with Defra, as the Assembly has not sought any budgetary transfers on that matter.
	I welcome the support given to the order, and thank the noble Lord, Lord Livsey, too, for his contribution.

On Question, Motion agreed to.

Fishing Boats (Satellite-Tracking Devices) (England) Scheme 2004

Baroness Farrington of Ribbleton: rose to move, That the draft scheme laid before the House on 21 September be approved [30th Report from the Joint Committee].

Baroness Farrington of Ribbleton: My Lords, before I describe this statutory instrument, I would like to draw to your Lordships' attention a typographical error in the version of the instrument before us today. In paragraph 8(1)(b), dealing with powers of authorised officers, the reference to paragraph 3(1)(d) should in fact be to paragraph 3(1). Unfortunately, this error was not picked up until Monday of this week when the instrument was debated and passed in another place. We have made efforts to alert your Lordships to this error and we will ensure that the typographical error in the instrument will be corrected when the instrument is printed in the annual bound volume of statutory instruments. In addition, a correction slip has been placed in the Printed Paper Office in order that your Lordships can see what the bound volume will say. I can only offer apologies to your Lordships.
	The scheme under debate today provides funding for the installation of satellite tracking devices on English fishing vessels. These devices are required by EU law by all fishing vessels over 15 metres from 1 January next year, but the Government announced in December 2003 that they would meet the full costs of supplying and fitting them. It may help if I explain why we agreed to do so.
	Satellite monitoring of fishing vessels forms an essential element of the control programme by which we monitor fishing activities. It enables the exact position of fishing vessels to be monitored on an ongoing basis through the provision of two hourly position reports. EU law has required vessels of more than 24 metres to carry a satellite tracking device since January 2000. In December 2002, to improve the effectiveness of member states' control measures, the Council of Ministers decided that that requirement should be extended to vessels of more than 15 metres.
	Terminals on vessels of more than 24 metres have proved a most valuable tool in monitoring fishing activity, but have been susceptible to tampering and abuse. The detailed rules adopted in December 2003 therefore require member states to take measures to ensure that satellite tracking devices fitted to fishing vessels are tamper-resistant. To ensure that devices on UK fishing vessels are tamper-resistant, we have undertaken a public procurement exercise, appointed a preferred supplier and drawn up a detailed technical specification. It is the intention, once it has been approved by the Commission, that only devices meeting the specification may be fitted on British vessels.
	The device will be dedicated to position-reporting. It will be used purely for control purposes and will yield no direct operational or economic benefit to the vessel owner. Because of that, it has been decided that Defra will meet the costs of fitting them to those vessels for which it is the licensing authority in England. Those costs—around £2,400 per vessel—cover the supply and installation of the device plus a three-year warranty. Similar funding arrangements are or will be in place in the devolved administrations.
	To avoid placing an unnecessary administrative burden on the industry, the scheme provides for funding to be provided directly to the authorised supplier. Once that is done and the device is fitted and operational, it will become the property of the vessel owner. They will then be responsible for meeting transmission costs for the two-hourly position reports required under EU rules. Those costs should be no more than £300 per annum.
	As I indicated, the extension of the requirement significantly strengthens tools to support the conservation and sustainable exploitation of fisheries resources. Government funding of the provision of the devices will go a significant way towards removing any additional financial burden on the industry. I beg to move.
	Moved, That the draft scheme laid before the House on 21 September be approved [30th Report from the Joint Committee].—(Baroness Farrington of Ribbleton.)

Baroness Byford: My Lords, we welcome and support the statutory instrument. We are very grateful to the noble Baroness for the way in which she brought the correction slip to our attention, and indeed to her office, which notified us on Tuesday that there was a problem.
	As the noble Baroness said, the scheme provides powers for Defra to fund fully the installation of tamper-resistant satellite tracking devices on all English-administered fishing vessels of more than 15 metres in overall length. She indicated that the devolved countries would address the issue, but has necessary legislation been put in place for that to happen in Wales, Scotland and Northern Ireland? Will their fishermen gain equal funding to that enjoyed by English fishermen under the scheme?
	I understand that the lifetime of the equipment is 10 years, but that the warranty covers only the first three. Will the individual owners have to take insurance cover in case anything goes wrong with the equipment and it has to be renewed in any way? My next question arises from that. Very sensibly, the Government have gone out to public procurement and, in doing so, have reduced the original cost from £3,300 to £2,100, for which everyone will be grateful. Has any consideration been given to a bulk insurance policy? If one could get a cheaper procurement policy, it seems logical that one might devise a bulk insurance policy for those fishermen, whether privately or in another way. They will obviously have to take out some form of insurance cover.
	The statutory instrument applies to all fishermen, who have to comply with the same standard. To me, that includes those EU member states and non-EU member states that fish in the waters. Will the Minister tell us more fully what waters are covered by the scheme? That is not defined in it, so I was left wondering how far and wide it went. I should be grateful for clarification.
	It has been said that, unfortunately, some countries in the EU have in the past slightly tampered with their satellite procedures, to put it in very careful English. Can the Minister reassure us that there will be no possibility of someone covering up their tampering procedures and so not activating the equipment? That is crucial. I have heard that, in one example, if a bucket was put on top of the equipment the message was not sent. It is all very well having sophisticated schemes, but however good they are, if someone can block them they become useless. Can the Minister tell us a little about that?
	In the other place, where the statutory instrument was taken through on Monday, the question of whether people abused the system arose. The Minister's colleague, Ben Bradshaw, said that there would be a fine of up to £50,000, and that the Government would take it up with the individual nation or the Commission. How confident is she that they will succeed in eradicating any malpractices? How quickly will they be dealt with?
	The Explanatory Memorandum tells us that there were 157 inspectors, 16 patrol boats and four aircraft in 2002. I suspect that the total is very similar today, although there might be a few changes. Presumably those people cover all the vessels within UK waters; I am not sure what waters we are defining. Presumably it is not only English boats that are monitored, but all boats fishing within the parameter.
	I am sorry to be a little specific with some of those questions, but it is important that we clarify them. Having sat through the previous statutory instrument—it was about compensation for people in Wales—I think it very important that it is on record that those who have qualifying boats in Wales, Scotland and Northern Ireland will also get the free and funded equipment from their respective governments.

Lord Livsey of Talgarth: My Lords, I too welcome the introduction of the scheme by the Minister. One problem in being second to respond is that many of the points that I wish to make have already been made by the noble Baroness, Lady Byford. I congratulate her on the way in which she has tackled the matter.
	The legislation is very important indeed. It is a step forward of substance for fisheries around the British Isles, in the whole of the European Union and, to some extent, beyond. We welcome the fact that the scheme will be funded by Defra to 100 per cent grant-aided conditions in England. I associate myself with the remarks of the noble Baroness, Lady Byford, as we also hope very much that that will occur in Wales, Scotland and Northern Ireland as well.
	The technology is extremely interesting, in terms of the detection and identification of fishing vessels and the ability for any false positions of them to be identified, which seems very necessary. The benefits of monitoring and surveillance at sea will be of great assistance in the enforcement of the common fisheries policy.
	Regarding the regulatory impact—I am grateful for the correction to the document. Two alert colleagues of mine in the committee in the other place identified the problem, which has rapidly been put right. I am grateful for that. It encompasses the Sea Fishing (Enforcement and Community Satellite Monitoring Measures) Order and the Fishing Boats (Satellite-Tracking Devices) (England) Scheme. It was stated that the sea fishing and community satellite monitoring order was still being drafted. Why is that the case and is the Minister in a position to say something about that? It seems rather strange that we are debating something that has not yet been fully drafted. There may be a good explanation for that.
	The purchase and installation of equipment for fishing boats is extremely useful and achieves enforcement, conservation and sustainable exploitation of fishing seas. I should like to make a couple of points that were raised in the European Union Sub-Committee D, when we were examining the Common Fisheries Policy. There is no doubt that over the years, particularly the past decade, we identified what we call the "technological efficiency creep" of the ability of the trawlermen to rapidly find where the fish were and to use much more efficient methods of taking them out of the water. Clearly, there is a need for more surveillance in that respect and we touched on that during Questions yesterday.
	There needs to be better deployment of the patrol vessels and the aircraft that have been mentioned. My understanding is that there are only nine patrol vessels around the waters of England and Wales. There are others in Northern Ireland and Scotland. That seems to be very few to do an enormous job. When one considers the number of boats coming in, not only from the UK but from other places, those patrol vessels must be stretched, even though about 60 staff, or slightly more, are involved. It seems that they will be stretched most of the time, because, presumably, they must have rest periods as well.
	I am sure that in the longer term, new developments regarding enforcement technology will come along. This is only the start. This legislation will improve the sustainability of fisheries around the UK and in the rest of the EU and is thoroughly to be welcomed. We hope that in future it will be even more effective in ensuring that we have some fish to catch.

Baroness Farrington of Ribbleton: My Lords, I shall try to answer all of the questions put by noble Lords. If I fail to answer any particular points, I shall write to both noble Lords who have spoken.
	The new control framework enhances the existing measures in terms of extending the ways in which the noble Baroness, Lady Byford, and the noble Lord, Lord Livsey, recognised in terms of the need to monitor the effectiveness and to inspect. That included not only the extension of satellite monitoring to vessels over 15 metres, but the registration of buyers of first-sale fish, the designation of single authorities within members states for co-ordinating the collection and verification of information on fishing activity; and reporting to and co-operating with the Commission. There is quite a list of other measures which are being absorbed into this.
	We will be able to detect if a device has been tampered with or detect false position reports—and we will take the appropriate action to deal with that. The statutory instrument is intended to be laid within the next fortnight and we are not aware of any devices that will be fitted, or could be fitted, under this measure that would allow an enforcement loophole. All English patrol vessels spend a total of 921 days at sea each year and satellite tracking will enable better targeting of where they are being deployed.
	Noble Lords raised the issue of the devolved administrations. Legislation is in place in Scotland and Northern Ireland and an announcement will be made soon by the Welsh Assembly. Insurance, which was raised by the noble Baroness, Lady Byford, is the responsibility of vessel owners and that will remain the case after the three-year warranty expires, as the noble Baroness thought. It is one of those areas where, perhaps, those involved in the industry may be interested to read the noble Baroness's words.
	This instrument applies to English vessels wherever they are. All vessels, including third country vessels, must have this operational device when they are in EU waters. Coastal member states will be able to detect any loss of transmission and take appropriate action.
	The new control agency that the Commission has identified will develop joint control and inspection procedures across the EU, assist member states to comply with their obligations and assist with planning the deployment of means of control and inspection at sea and on shore. I understand the points made by both noble Lords regarding the fact that previously the devices could be blocked by putting buckets over them. My understanding is that that is not possible and is one of the reasons why we have carefully gone through the procurement procedure to ensure that these devices best meet the tamper-resistant requirements of the regulations.
	The noble Baroness referred to the negotiations during that procurement procedure, which, as the noble Baroness recognised, reduced the unit cost from £3,300 to £2,400 per unit. She also raised the issue of other member states. The regulation from the Commission does not specify precisely how tamper-proof provision will be achieved, but the member states must ensure that the requirements are met in full. Regarding false position reports—the device that we have selected cannot be manually overridden.
	Both noble Lords sought from me almost a guarantee that the Commission had managed to come up with a system that would be absolutely guaranteed. I can assure the noble Baroness that it is a robust position and that all member states are being required to comply with it. It would be difficult for any member of any government in any member state to say that this regulation could never be breached or flouted. That would be foolish. It is robust, and we are very grateful for the support given to it by noble Lords.
	Perhaps I may write to the noble Baroness, Lady Byford. I suspect that I need to consult a map with shading on it rather than risk my knowledge of the exact position of the sea areas involved around the whole European Union. I should rather write to noble Lords.

Baroness Byford: My Lords, before the noble Baroness sits down—I am not chasing her on that point—I think that she indicated that it was all EU waters. I hope that I heard her correctly but I shall look at Hansard tomorrow.
	My second point is: where will the new commission be based? Will it be in Spain? I thought that that was mooted at one stage and, from the nods that are coming my way, I think I am right but I simply wanted clarification.

Baroness Farrington of Ribbleton: My Lords, I did confirm that.

On Question, Motion agreed to.

Baroness Farrington of Ribbleton: My Lords, I beg to move that the House do now adjourn during pleasure until 2.15 p.m.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 2.11 to 2.15 p.m.]

Pensions Bill

Further consideration of amendments on Report resumed.
	Schedule 7 [Pension compensation provisions]:
	[Amendments Nos. 169 and 170 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 171:
	Page 295, line 41, at beginning insert "Subject to sub-paragraph (3A),"

Baroness Hollis of Heigham: My Lords, in moving Amendment No. 171, I shall speak also to Amendment No. 174 and the associated amendments in the group.
	There are three elements to these amendments to paragraph 23 to Schedule 7. The first—new paragraph 23(1)(a)—will allow the Secretary of State, through regulations, to provide for PPF compensation payments to be made to surviving partners. The second is a group of amendments to prescribe that the widow or widower of pensioners, postponed pensioners, and deferred and active members will not be entitled to compensation in such circumstances as may be prescribed. The third—new paragraph 23(1)(b)—is intended to clarify the circumstances in which the regulations may provide that the PPF board will be able to pay compensation to surviving dependants.
	I shall explain the thinking behind paragraph 23(1)(a) first. The Bill currently makes provision for compensation to be paid only to surviving spouses. During the Committee stage in the Commons, an amendment put forward by Steve Webb sought to extend this provision to surviving unmarried partners. My honourable friend the Minister for Pensions, Malcolm Wicks, agreed to consider the proposal further.
	On reflection, we considered that we did not want to close the door to payments to unmarried partners. Although among current and soon-to-be pensioners marriage remains overwhelmingly the norm—around 13.3 million out of a total population of 14.6 million of those over the age of 50 are married or widowed—there is an increasing preference among younger age groups for cohabitation without marriage. Further, about three-quarters of private sector defined benefit scheme members are in schemes that provide benefits to unmarried partners—that is, three-quarters of members and not three-quarters of schemes; the proportion of schemes is low because often very small schemes do not have this provision.
	Given that, we felt that an amendment to the Bill was essential, and I hope that your Lordships will welcome it today. Without such an amendment, the PPF would be unable to cover a key feature of the pensions promise in the majority of schemes—a feature that will only increase in importance in the future. I think I am right to say that such a change was recently made to the MPs' pension scheme.
	We also had to consider that, because marriage is not an option for same-sex couples, the PPF will provide no security for those in long-term same-sex relationships. Many of the same arguments apply here: a more significant number of co-habiting same-sex couples is in younger age groups, although the numbers remain small, and the majority of pension schemes will pay benefits to surviving same-sex partners. I think that something like 75 per cent of schemes do that. Therefore, we have ensured that the power is wide enough to cover same-sex partners and civil partners.
	The detail will be set out in regulations but we expect to provide, first, for members of schemes that make any provision for unmarried survivors. Surviving civil partners and surviving unmarried partners will receive 50 per cent of a member's total compensation. In other words, if the scheme already makes such a provision, that will continue under the PPF.
	Under schemes that make no provision for unmarried survivors, surviving unmarried partners will receive nothing but surviving civil partners will receive 50 per cent of a member's total compensation. That is because, for the first time, they will be treated as though they were in a spousal relationship for the purposes of this provision. We always intended that the PPF would pay compensation to surviving civil partners, and I think that in Committee I gave notice that I would be returning to this point as we worked through the amendments.
	The second part of the amendment has been introduced to maintain consistency between surviving spouses, civil partners and unmarried partners. These amendments provide regulation-making powers to provide that the PPF will not pay compensation to a widow or a widower in prescribed circumstances. The power will be used to provide that compensation which will be paid only to those widows or widowers who would have received survivor's benefits under their scheme. These amendments ensure that the PPF is not more generous than the schemes, though spouses will not be assessed against scheme rules.
	Through regulations, we will pay surviving spouses 50 per cent of a member's total compensation entitlement where the scheme would have paid surviving spouses benefits. In other words, the scheme may have paid 60 per cent or 70 per cent, but we will not take that degree of detail into the PPF. Everyone entitled to survivor's benefits—widows, widowers, civil partners in due course, and unmarried partners if they had that protection in their original scheme—would receive 50 per cent. We simply cannot go into the complexity of replicating the detail of each scheme and continue to fund that in the PPF.
	I turn to the third part of the amendment, the proposed Section 23(1)(b). This amendment seeks to clarify the categories of dependants to whom compensation may be paid. The entitlement to compensation is to be prescribed in regulations. The first of the categories is composed of dependants of prescribed descriptions of individuals who were members of a scheme or who had rights in respect of such a member—such as individuals who were eligible for survivor's benefit under the scheme—before the assessment date. So no one who would have received it under the old scheme would lose it under the PPF.
	The second category comprises dependants of individuals who became entitled to benefits in respect of a member—for example, those who became eligible for survivor's benefit—on or after the assessment date but before the board assumed responsibility for the scheme. The final category comprises dependants of individuals who became entitled to compensation under paragraph (22).
	Essentially, those categories, which are entirely benign, allow us to capture the dependants of all individuals who are or may become eligible to receive PPF compensation. I believe that these amendments will form an important part of the security, propriety and decency that the PPF will offer to members of eligible schemes. I am confident that your Lordships will welcome these changes. I have taken a little time to spell them out because, given the Civil Partnership Bill, I think it important that people know what we are proposing. I hope that, with that explanation, your Lordships are happy to accept the amendment. I beg to move.

Lord Oakeshott of Seagrove Bay: My Lords, I am sure that I speak on behalf of my right honourable friend the Member for Northavon in welcoming these amendments which properly reflect the modern world.

Lord Higgins: My Lords, as I was also heavily engaged in the Civil Partnership Bill, perhaps one understands this a bit better than the general public may initially do.
	I have just a couple of questions. First, is the noble Baroness saying that the PPF will in some circumstances pay out benefits that the recipients would not have received under the scheme of which they are a member? Secondly, is it proposed to make provision for unmarried opposite-sex couples regardless of whether the scheme of which they are a member and which has been taken over does so? More particularly, will unregistered same-sex couples be in the same position as unmarried opposite-sex couples? I think that that is rather important, not least as far as the intended operation of the Civil Partnership Bill is concerned.

Baroness Hollis of Heigham: Basically, my Lords, we will be giving all widows and widowers 50 per cent rights. I think that there may be one or two schemes that still do not do that, which is very odd, but in that case it is a question of the scheme rules overriding the rules of the scheme. In some cases, widows may receive less than 50 per cent, rather than more, but they will receive 50 per cent under the PPF. Civil partners will, accordingly, be treated in the same way.
	Where an existing scheme has survivor's benefits for unmarried partners, regardless of whether it is a heterosexual or single-sex couple, they will take the rules of their scheme into the PPF. In other words, we will not take away any rights that people currently enjoy in their existing scheme. However, if their existing scheme does not provide protection for unmarried partners in either heterosexual or single-sex couples, neither will the PPF.

On Question, amendment agreed to.

Baroness Turner of Camden: moved Amendment No. 172:
	Page 295, line 44, leave out "half" and insert "the same proportion"

Baroness Turner of Camden: My Lords, in moving Amendment No. 172 in the name of myself and my noble friend Lady Gibson of Market Rasen, I shall speak also to a number of other amendments in this group to which my name has been put: Amendments Nos. 173, 177, 178, 183, 184, 188, 189, 191, 194 to 197 and 200 to 203. I think that, in total, we have 14 amendments in this group, because the specific sentence that we wish to amend occurs about 14 times in the schedule.
	The reason for the amendment is that we want to ensure that widow's and widower's benefit paid by the PPF are the same as widow's and widower's benefits would have been had they been paid by the scheme. As I am sure noble Lords will know, different schemes provide greater or lesser proportions of the member's pension to a surviving spouse on the member's death. In order to contract out of the state second pension, the proportion must be greater than 50 per cent.
	Many schemes provide two thirds, which is the Inland Revenue maximum. However, the provision in Schedule 7 requires the proportion to be 50 per cent in every case. The purpose of the amendments is to reinstate the proportion as two thirds where that is what the scheme would have paid. I hope that my noble friend will regard this as a reasonable and sensible amendment. I beg to move.

Baroness Noakes: My Lords, I should like to speak briefly in favour of the noble Baroness's amendment, which I think is about fairness to women more than anything else. The provision in the Bill means that, very largely, it is women who will lose out. The noble Baroness referred to schemes that pay out higher amounts than 50 per cent. There are indeed some.
	Over the summer, I corresponded with the noble Baroness, Lady Hollis, about a slightly different position where a widow's pension was based on a proportion, but a proportion of the pre-commuted pension of her husband. Consequently, the proportion of the pension that she received was even higher than two thirds, because of the way in which a pension sacrifice had been taken earlier in retirement in order to provide for my mother. If this Bill is passed, her income could be sliced by almost a half. So the Bill could bear very unfairly on people whose expectations are that they will have a certain income level. It could come down very significantly on them.
	The Minister said that it is too complicated to take in all the individual arrangements. If it is not too complicated to take in the primary pensioner's arrangements, I cannot see why it should be excessively complicated to take in the arrangements that apply to widowers or indeed dependants.

Baroness Hollis of Heigham: My Lords, I do not know whether I shall be able to answer the noble Baroness. I may be given the advice that perhaps the noble Baroness should write to me with the circumstances. I am not quite sure where tax-free lump sums came in and so on. Perhaps I may respond to the amendment of my noble friend Lady Turner, which in a sense revisits a previous discussion. Perhaps it should have been grouped with other amendments. If that is the case, the fault lies with me and I apologise.
	Essentially, my noble friend is arguing that we should import into the PPF the same level of widows' benefits as existed in the previous schemes. As I say, we did go round this point. I am sorry but we are not going to do that; the PPF will not replicate it. However, our policy mirrors the survivors' benefits offered by the majority: 75 per cent of schemes covering 84 per cent of members of private sector DB schemes will do as we shall be doing. We have tried to keep a balanced package between a meaningful level of compensation and something that is affordable and easy to administer. Some schemes pay less, although I accept that, for the most part, they may pay slightly more.
	I am afraid that we have made an administrative decision that the simplest way is to pay 50 per cent because what goes into the PPF is pooled assets. Logically, that could have led to excluding the payment of unmarried partners. We thought long and hard about what we should do there, when some schemes have it and some do not, unlike survivors' benefits. In that exception only—there are still quite strong feelings about it and in some schemes one pays additional money to receive those benefits—we decided that we would import that characteristic into the PPF only in so far as existing schemes had it.
	I am afraid I have to say to my noble friend that we believe that what we are offering reflects what the vast majority of schemes do. There are schemes that can be more generous and there are schemes that are less generous. We thought that this was simple to understand and that people would know what their expectations would be after going into the PPF. It would not depend on some complicated assessment of 90 per cent of X and so on.
	On the question posed by the noble Baroness, Lady Noakes, the PPF survivors' benefits will be post-commutation. That may help. If she cares to write to me with the details, I shall try to obtain a more careful answer for her. I do not believe that it is unfair to women. On this issue I believe that most women will have a fairly secure and predictable pension.
	At the moment individual trustees make quite complicated decisions on whether a child is a dependant when he or she goes to university and such matters. We are trying to establish rules that apply to everyone so that people know what they are and reflect the situation in which they are engaged at the moment. I cannot help the noble Baroness beyond inviting her to write to me if she wishes, except to say that it will apply only to post-commutation.
	To my noble friend I say that I am sorry, but in the name of straightforward administrative simplicity, the only exception where the details of the scheme will affect what comes out of the PPF will be in the situation of unmarried partners.

Baroness Turner of Camden: My Lords, I thank my noble friend for that explanation. I am a little disappointed because, as the noble Baroness, Lady Noakes, said, this relates largely to women. I thank her very much for her support. Of course, I am pleased that something is to be done for unmarried couples and I am delighted that same-sex couples will also be looked after in the way indicated by my noble friend. That still leaves widows, in many instances, with a much reduced expectation than they would have had, had the pension scheme still been in existence and able to provide for them. However, it is not my intention to press this matter this afternoon. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 173 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 174:
	Page 295, line 47, at end insert—
	"(3A) The pensioner's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
	On Question, amendment agreed to.
	[Amendment No. 175 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 176:
	Page 296, line 45, at beginning insert "Subject to sub-paragraph (3A),"
	On Question, amendment agreed to.
	[Amendments Nos. 177 and 178 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 179:
	Page 297, line 5, at end insert—
	"(3A) The postponed pensioner's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
	On Question, amendment agreed to.
	[Amendments Nos. 180 and 181 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 182:
	Page 298, line 32, at beginning insert "Subject to sub-paragraph (3A),"
	On Question, amendment agreed to.
	[Amendments Nos. 183 and 184 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 185:
	Page 298, line 39, at end insert—
	"(3A) The active member's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
	On Question, amendment agreed to.
	[Amendment No. 186 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 187:
	Page 301, line 25, at beginning insert "Subject to sub-paragraph (3A),"
	On Question, amendment agreed to.
	[Amendments Nos. 188 to 191 not moved.]

Baroness Hollis of Heigham: moved Amendments Nos. 192 and 193:
	Page 301, line 40, at end insert—
	"(3A) The active member's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
	Page 304, line 20, at beginning insert "Subject to sub-paragraph (3A),"
	On Question, amendments agreed to.
	[Amendments Nos. 194 to 197 not moved.]

Baroness Hollis of Heigham: moved Amendments Nos. 198 and 199:
	Page 304, line 36, at end insert—
	"(3A) The deferred member's widow or widower is not entitled to periodic compensation under this paragraph in such circumstances as may be prescribed."
	Page 307, line 18, leave out from "of" to end of line 22 and insert "—
	(a) partners of prescribed descriptions of persons of prescribed descriptions who were members of the scheme immediately before the assessment date;
	(b) dependants of prescribed descriptions of persons of prescribed descriptions who—
	(i) were members of the scheme, or had rights to benefits payable under the scheme rules in respect of a member, immediately before the assessment date,
	(ii) became entitled to benefits under the scheme rules in respect of a member on or after the assessment date but before the time the trustees or managers of the scheme received a transfer notice under section 158, or
	(iii) have become entitled to compensation under paragraph 22 (survivors who do not meet conditions for scheme benefits at assessment date), in relation to the scheme."
	On Question, amendments agreed to.
	[Amendments Nos. 200 to 204 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 205:
	Page 315, line 12, at end insert—
	:TITLE3:"Power to modify Schedule in its application to certain schemes
	32A Where the scheme is a prescribed scheme or a scheme of a prescribed description, this Schedule applies with such modifications as may be prescribed."
	On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendment No. 206:
	Page 317, line 14, leave out "or category"

Baroness Hollis of Heigham: My Lords, this amendment is necessary as a result of the change to the definition of occupational pension scheme made by Clause 237 and the consequential change that was made to the definition of employer in Clause 316.
	Clause 237, which replaces the definition of occupational pension scheme in Section 1 of the Pension Schemes Act 1993, was made as a consequence of changes in the Finance Act. The old definition included the phrase, "categories of employment", which was replaced with "service in employments of a description". The word "description" refers to the description in the scheme rules. As a consequence of this, the definition of employer in Clause 316 was also altered to refer, in the case of occupational pension schemes, to the employer as "the employer of persons in the description of employment to which the scheme in question relates". This had also previously referred to "persons in the description or category of employment". With that lucid explanation of the amendment, I am sure that your Lordships will be happy to accept the amendment, which realigns the vocabulary.

On Question, amendment agreed to.
	Clause 170 [Relationship with fraud compensation regime]:

Baroness Hollis of Heigham: moved Amendment No. 207:
	Page 128, line 23, leave out "date" and insert "time"
	On Question, amendment agreed to.
	Clause 172 [Initial levy]:

Lord Higgins: moved Amendment No. 208:
	Page 130, line 7, leave out "that date" and insert "the day referred to in paragraph (a)"

Lord Higgins: My Lords, we come to a series of important amendments regarding the levy. It may be helpful if I say a few words by way of introduction. We have discussed this matter in Grand Committee. A number of the issues have become more clearly defined. It is important when looking at the Bill as a whole always to bear in mind that its effect, while beneficial in many respects, is nonetheless likely to encourage—if that is the right word—companies to abandon final salary schemes to avoid the levy or certainly not to encourage any company from setting up a final salary scheme, given that the company would then become liable to the levy. So, the burden of the levy, its timing and its nature are crucial to the whole scheme. The greater the extent to which the levy is more onerous than it ought to be or the longer it is in an unsatisfactory state, the greater will be the deterrents to which I just referred. Therefore, it is important that the House should get the thing right.
	We consider the issue against the background of what can only be described as the tragic decline in the number of final salary schemes. It is due to factors including the fact that people live longer and what one might call the scandalous changes that the Chancellor of the Exchequer has made in advance corporation tax. A heavy burden has been imposed on companies as a result of those and other changes, combined with the fall in the stock market, the lowering of annuity rates, and so on. The Bill is necessary to deal with companies that have decided, one way or another, that their schemes cannot continue to function.
	I turn to the specific question of the levy. The first amendment is concerned with timing. Others are concerned with the nature of the levy with regard to the extent that it should be risk-based, and so on. In Clause 172, the Government seek to set out the provisions with regard to the initial levy. That levy will be on a flat-rate basis. It will not take account either of the standing or solvency of the company whose scheme we are considering or the extent to which the scheme is underfunded. In that period, the levy will be on a flat-rate basis. We strongly believe that the scheme should be changed to a risk basis. In some ways, we would like it to start off on a risk basis.
	There are considerations with regard to assessing the risk, but we do not accept some of the arguments that have been put forward that assessing the solvency of a company can be done using the available information on a broad-brush basis. Initially, it must be a broad-brush basis.
	Secondly, we do not accept the argument that the question of the solvency of the scheme, and so on, is determined by the fact that pension schemes normally have a triennial valuation. I have been through that process. Not infrequently, companies will have an interim evaluation, not of every comma and dot but sufficient to enable a reasonable assessment of the position of the scheme.
	The Bill says that the initial period will begin,
	"with the day appointed for this purpose by the regulations".
	We do not know how long it will be before that happens, although we hope that it will happen as soon as possible. The clause then says that the period will end on,
	"the following 31st March or, if the regulations so provide, 12 months after that date".
	We suggest that the date should be 12 months after the date when the regulations begin the initial period. It is a tightening of the timescale, but we believe that it is appropriate for all the reasons that I mentioned.
	Once the Bill becomes law, we must get on with the matter and ensure that we move to a risk basis and away from a flat-rate basis at the earliest possible moment. I beg to move.

Lord Oakeshott of Seagrove Bay: My Lords, we strongly support this amendment and have tabled a similar one. We are concentrating on this amendment, which establishes a principle that we strongly support.
	We discussed the matter at length on Second Reading and in Committee. Together with, I think that it is fair to say, all the major industrial and commercial firms—certainly, the great majority—in this country, the National Association of Pension Funds, EEF and the vast majority of representative bodies, we believe that it is essential to move to a risk-based levy as soon as possible. "As soon as possible", for most people—certainly for us—means that the flat-rate levy should not last for longer than a year.
	I have here, for example, the comments of Terry Faulkner, chairman of the National Association of Pension Funds, who said that the timetable that the Government were talking about was "absolutely unacceptable". He said:
	"The purpose of the PPF is to protect benefits from those companies that go bust with an underfunded pension scheme. The right way to deal with the premium is on a risk-based basis like other forms of insurance".
	Colin Hartridge-Price, chief pensions officer of the BT pension scheme—the largest pension fund in the country—said:
	"The risk-based levy should be introduced in full as soon as is practicably possible. It should surely be possible for the PPF Board to agree a formula within the first 12 months of its operation".
	At Second Reading, we discussed the idea that, over several years, some funds could be allowed to stay on a flat-rate basis and others go on to a risk basis. I think that we exploded the idea that we could have an insurance scheme in which the good risks paid one rate and were flat rate, while the bad risks were not. We must go over within a year to a fully risk-based—or minimum 80 per cent risk-based—levy. In any insurance scheme or policy, one will not know exactly what the risks are but, in this case, waiting for the best will be the enemy of the good. The one thing that we know is that the longer we go on with a flat rate policy—a poll tax on pension funds, in effect—the more unfair it will be to the better funded schemes and to the responsible employers who are doing their best to reinforce their funds.
	The noble Baroness said a good deal about moral hazard. What greater moral hazard could there be than not going to a fully risk-based levy as soon as possible? We strongly support the amendment.

Baroness Hollis of Heigham: My Lords, the first thing to say is that I, too, support the amendment: I just cannot accept it. I hope to explain the reasons.
	The noble Lord, Lord Higgins, clearly spoke about the initial period. The noble Lord, Lord Oakeshott of Seagrove Bay, talked about the initial and transitional periods put together. There is a wide chasm between those positions. We may be able to tease that out later.
	Making the amendment moved by the noble Lord, Lord Higgins, would mean that the initial period would run from the appointed day until the following 31st March or 12 months after the appointed day. In effect, therefore, the amendment would limit the initial period, when everybody will be on a flat rate, to no longer than 12 months. I point out to the noble Lord, Lord Oakeshott of Seagrove Bay, that we propose a transitional period thereafter in which we phase in the risk-related levy. I got the impression that he thought that the whole risk-related scheme could come in one day after the 12 months. If that is what he is saying, it worries me considerably.
	Limiting the initial period to 12 months would, first, remove the in-built element of contingency that we have put in place, should it be necessary for the period to be longer. When I sat on the Benches opposite, the late, lamented Lord MacKay of Ardbrecknish came here to explain why, although the Bill said that the jobseeker's allowance would take effect from April 1996, it would, to his regret, have to be delayed for another six months until October 1996. That inconvenienced him slightly, as he had found some difficulty with the regulations and the primary legislation, which determined the timetable. These things happen. It was not intended; we had to accept it. Any Minister knows that things do not always go absolutely according to plan—we do not need to talk about the CSA in that context.
	Secondly, the amendment would also mean that the initial period could end after the start of the financial year. I said that I supported the amendment but could not accept it because we did not envisage the initial period being any longer than 12 months. However, as we are launching a new organisation, we think it prudent to build in an element of contingency to allow for unforeseen difficulties. Obvious examples would be computer hiccups: the Standish Group found that around two thirds of all computer projects ran over time. I do not want to get hung up on debates about computers but I can conceive that such problems could arise—they certainly did with JSA.
	The formulation of the amendment means that the initial period could end after the start of a financial year. As the pension protection levies operate by reference to financial years, problems could arise. Sponsoring employers and schemes would find it more difficult to plan ahead financially, in line with current business and scheme requirements. It would also mean that the annual reporting requirements of the PPF and the general levy currently collected by OPRA, both of which operate by reference to financial years, were carried out at different times.
	Again, we fully expect that the PPF will open its doors on the date anticipated and that the initial period will last no longer than 12 months. We just do not want to be tied to it by its inclusion in the Bill in case a contingency arises that has not occurred to noble Lords opposite or those on the government Benches. I hope that what I have said will enable noble Lords to withdraw their amendment.

Lord Higgins: My Lords, the noble Baroness asked whether the Liberal Democrats and the Conservatives were singing from the same hymn sheet. Yes, we are; that will become apparent in our debates on subsequent amendments.
	Today's sitting began with Question Time, during which a Question was asked on firearms legislation. It was pointed out that the Government had not carried through the legislation, seven years after the Bill was passed. The Minister replied, "They did not put a date in the legislation. If a date had been included, we would have stuck to it". It seems that there is a lesson to be learnt as regard legislation: apparently, if you do not give this Government a definite deadline, the process may drag on for seven years or more—I suppose that they get an itch at that moment.
	I understand the noble Baroness's point about financial years and so on. However, we want to insert a very clear deadline. We think, therefore, that the amendment is appropriate. I regret that, although the noble Baroness agrees with it, she is not prepared to accept it. Not only do we agree with the amendment, but we think that it would be appropriate to test the opinion of the House.

On Question, Whether the said amendment (No. 208) shall be agreed to?
	Their Lordships divided: Contents, 147; Not-Contents, 106.

Resolved in the affirmative, and amendment agreed to accordingly.
	[Amendment No. 209 not moved.]
	Clause 173 [Pension protection levies]:

Lord Higgins: moved Amendment No. 210:
	Page 130, line 17, leave out "one or"

Lord Higgins: My Lords, I have already made preliminary remarks about this group of amendments. We are arguing very strongly that the scheme should be a risk-based scheme as soon as possible. The purpose of the amendment is to leave out the possibility that, after the end of the initial period, the Government would have powers to have either a risk-based basis or a scheme basis that is not risk based, or both. The amendment seeks to remove the possibility that they might be able to continue with a scheme-based basis—one that does not take risk into account—after the initial period. For the reasons that the noble Lord, Lord Oakeshott, and I have previously spelt out, in our view, at the end of the initial period, it would be appropriate for us to go to a risk-based basis. I beg to move.

Lord Oakeshott of Seagrove Bay: My Lords, as the Minister seems to think that there might be a chasm opening between the noble Lord, Lord Higgins, and myself, perhaps I may make it clear that that is not so. I apologise if in my enthusiasm I ran slightly ahead of the narrow definition of the previous amendment. But I wish to make it clear that we sing from the same hymn sheet on this issue. For the reasons that I have discussed at some length, we support the amendment.

Baroness Hollis of Heigham: My Lords, I thought that the noble Lord's hesitation on the words "hymn sheet" was because he was trying to work out what the nature of the breadth of the inclusive Church might be.
	As regards the amendment, we intend to give the board the flexibility to set the pension protection levies as it best sees fit, subject to certain constraints. Our general concern is that this amendment would unnecessarily constrain the board to the detriment of schemes and employers.
	The pension protection levies must seek to balance two issues: on the one hand they should reflect the level of risk posed by schemes so that, very simplistically, well run and well funded schemes pay less, which we all accept; on the other hand, we must avoid setting the levy in such a way that it becomes unaffordable for many schemes.
	We anticipate that the board will do that by setting a predominantly risk-based pension protection levy alongside a smaller scheme-based protection levy. As noble Lords know, we expect that ratio to be about 80:20 per cent risk-based to scheme-based when the transitional period is mature.
	The scheme-based pension protection levy will also ensure that every eligible scheme may pay something to the pension protection levies. That reflects the view that in the very long term no scheme represents zero risk. That will mean that the board will be able to reflect, with a fair degree of accuracy, the level of risk that a scheme poses to the PPF, but the underlying scheme-based pension protection levy will help to narrow the range of levy charges so that schemes in difficulty are not landed with an unsupportable levy.
	Basically, we have got the problem of adverse selection: not being careful and going too fast in this way will end up so reducing the risk-related levy that the scheme-based levy has to soar commensurately. Those schemes therefore that have not just that but also have poor risk could find themselves having a level of payment that I think that we might all judge to be, at least initially, unacceptable. So we anticipate that in most years the board will set both protection levies as required by the amendments.
	However, there are several occasions when setting both protection levies and applying the risk-based protection levy to all schemes may not be appropriate. Noble Lords may want to reflect on whether it is appropriate to follow their amendment through after hearing the examples that I will offer the House.
	For example, there will be a number of extremely small eligible schemes that are required to pay the levy—applying an extremely complex risk-based calculation to schemes, which might have 10, 20 or perhaps 40 members, would be a case of using a using a sledgehammer to crack a nut—and providing the required information may be overly burdensome and costly for the scheme.
	We therefore want to give the board the freedom to set a simplified levy for small schemes should it so wish. That may involve setting only a scheme-based pension protection levy. Noble Lords will remember that that scheme-based protection levy, although it is so to speak flat rate, also differentiates between deferred, active and retired members—it has different rates for those. In other words, it assesses the liabilities of the scheme as opposed to the risk-related levy, which seeks to determine the risk to entering the PPF. That is the different functions of the two levies.
	It may be that after consultation the board will establish a method for calculating the risk-based pension protection levy that does not result in any extremely high charges. For example, the board may start with a maximum charge for particular sizes of scheme and then discount according to risk factors. If that is the case, we would want the board to be able to charge a risk-based pension protection levy only.
	Lastly, if the board estimates to collect an extremely small levy in any given year, we do not want that impeded because the costs of assessment might come near the value of recoveries for whatever reason. It does not seem that probable but if, for example, it wants a small amount, the costs of going for the risk-based levy in that case might be excessive.
	We are therefore allowing the board to set a scheme-based pension protection levy only when it estimates to collect less than 10 per cent of the levy ceiling in any given year. That is almost like a cost benefit—a point made by the industry that it feels would be wise.
	I reassure your Lordships that in the majority of cases we expect the board to act in accordance with the spirit of the amendments. However, because of concerns that that would require us to force an unnecessarily complicated levy structure on small schemes, and because until the method of calculating the risk-based pension protection levy is settled, we do not know the extent to which the scheme-based pension protection levy will be necessary. We therefore do not want to require that of the board, so I urge the noble Lord to withdraw his amendment.
	The difference between us is that the noble Lord believes that the information that is necessary will be available in ways that we do not believe. It will be a secure enough base to resist possible challenges, and so on. During the initial period, we intend to differentiate charges for active, deferred and pensionable members. After the initial period, it will be up to the board to decide whether to do it. We do not disagree, but the implications of the amendment would be to impose a risk-related levy for small schemes, for example, when that would be inappropriate, costly and regarded as a burden by small businesses. With that explanation, I hope that the noble Lord will agree that the gap between us is small. We want some flexibility, and I hope that the noble Lord will feel able not to pursue his amendment.

Lord Higgins: My Lords, I am surprised that the noble Baroness can produce arguments at this stage of the Bill that she has not used previously. One or two which she produced this afternoon were not made as clear in Committee.
	We believe that it is appropriate that the PPF should impose, after the initial period, both a risk-based levy and a scheme-based levy. Obviously, with regard to the scheme-based part, that may cover overheads and so on. I stress strongly that this is on a broad-brush basis—we do not want to go to the last decimal point. But it should be possible to work out a reasonable assessment of risk in relation to each scheme that pays the levy. Otherwise, it would be unfair on those who enter the scheme.
	The noble Baroness says that it would be to the detriment of schemes and employers, but I do not see how. The noble Baroness likes to call it a compensation scheme, but it is effectively an insurance scheme. The curiosity is that if one were not careful one would end up with a flat-rate levy where there is a danger that the people who are the soundest—either in terms of the ability of the employer to continue in business, or in the financing of the pension scheme—would not operate effectively.
	I am not persuaded by the arguments of the noble Baroness. It is right to put a firm framework in place for the Pensions Protection Fund to work within. That should not be too difficult.
	One could do it by category of scheme for small schemes, when perhaps the risk element is small compared with that of larger schemes. I imagine that the board will wish initially to do it by type of scheme rather than on a general basis.

Baroness Hollis of Heigham: My Lords, it would be impertinent of me to ask a direct question, but I take it that the noble Lord has heard the view of industry on this issue. The ABI states:
	"We believe that a maximum period of this length"—
	the transitional period, as envisaged by the Government—
	"strikes the correct balance between what is administratively possible and what is desirable".
	The industry, as reflected by the ABI, is backing the Government's position as against that adopted by the noble Lord. That point was made by his honourable friend Nigel Waterson in Committee in the other place.
	The feeling within the industry is that a two-year period of transition is probably unrealistically tight. It would prefer a transitional period of about four years. The noble Lord's honourable friend in the other place argued for what the Government are proposing. Because of consultation with the industry, that position no doubt reflects the industry's views, and those of the ABI.
	The provision is not something that has been dreamt up by the Government. It is the result of consultation. One should be a little careful about appearing to go against the wishes and consensus that appears to be emerging from the industry that we have consulted.

Lord Higgins: My Lords, things have moved on. An enormous amount of consultation has taken place on all those issues. When one receives representations, one should take into account the interests of those making them—I am not thinking of any particular organisation when I say that. Some of the initial representations that were made when the Bill was in the other place suggested that it might be 2009 before we got to a risk-based levy.
	I presume that the arguments to which the noble Baroness is referring are those that she has put forward this afternoon. They relate almost entirely to the position of small firms rather than the overall situation.

Baroness Hollis of Heigham: My Lords, I refer to the quotation from the ABI that I mentioned in good faith. I was not present in the Committee attended by the noble Lord's honourable friend who was leading for the Conservatives, but he reflected the general position of the Government to phase in over a transitional period the risk-related levy alongside the scheme-based levy.
	Small schemes are an additional problem. Given the amendments, small schemes would have to have a risk-based levy whether or not it was sensible or appropriate. That is an additional complication.

Lord Higgins: My Lords, I understand that it is an additional complication, although the noble Baroness did not put forward the other arguments to which she is referring. If we are to be fair to employers and companies generally, it is important to go to a risk-based levy at the earliest possible moment.

Lord Oakeshott of Seagrove Bay: My Lords, does the noble Lord agree that the ABI does not represent the pension fund industry? It is a supplier of investment management services to the pension fund industry. It is in a small minority in its view; it is not the view of the National Association of Pension Funds, or the major in-house pension funds.

Lord Higgins: My Lords, I was carefully avoiding being rude about the ABI for whom I have enormous respect. I said that when receiving representations from outside bodies, it is wise to consider whether they have a particular axe to grind. I am not saying whether the ABI has or has not in this case. I think that one should apply—as all good economists do—an appropriate rate of discount. One must consider the arguments on their merits while taking into account the views that have been expressed. Having considered the issue carefully, and having discussed it over a long period—the Bill has been in progress for a long time—the amendment is appropriate. I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 210) shall be agreed to?
	Their Lordships divided: Contents, 149; Not-Contents, 104.

Resolved in the affirmative, and amendment agreed to accordingly.

Lord Higgins: moved Amendment No. 211:
	Page 130, line 18, after "of" insert "all"
	On Question, amendment agreed to.

Lord Higgins: moved Amendment No. 212:
	Page 130, line 21, at end insert—
	"( ) The proportion of the levy to be raised under subsection (1)(a) and (b) shall be 80% and 20% respectively."

Lord Higgins: My Lords, in moving Amendment No. 212, it would be convenient also to discuss Amendment No. 217A. Noble Lords will appreciate that these amendments address essentially the same point. I shall argue them jointly, although we have come to the view that Amendment No. 212, although good, is inferior to Amendment No. 217A. At the appropriate moment, therefore, I shall withdraw Amendment No. 212 and in due course move and propose a vote on Amendment No. 217A.
	Amendment No. 212 is the third of a group of amendments in which the point at issue is comparatively simple: what proportion of the levy raised under Clause 173(1)(a) and (b) shall be risk-based and what percentage on a scheme-based provision? While the noble Baroness earlier cited the views of industry—wrongly, in my view, given the context in which she made those remarks—so far as industry in general is concerned, I think that there is a strong feeling that the proportion on the scheme basis, which may be used to cover the overhead costs of the scheme and so forth, should be comparatively low while the risk-based element should be comparatively high. For that reason, our amendment suggests that the proportion ought to be at least 80 per cent.
	The arguments are fairly simple and we discussed them extensively in Committee. It is now appropriate for the House to consider them. I beg to move.

Lord Oakeshott of Seagrove Bay: My Lords, I should make it clear that Members on these Benches also support the amendments. I have already discussed why, but I rise to quote briefly from a very perceptive letter I have received from one of Britain's pension funds. It sets out clearly the problem being faced by private pension funds in this country and why moving quickly to as full a risk-based levy as possible is important:
	"The practical question is how can we tackle the deficit ... This depends a lot on the long term strength of the business involved. In all probability, most of the big industrial companies will be around on a twenty year view and can approach this in a gradualistic way—a combination of increasing contributions, reinvested investment returns and changing benefit structures. The company that I work for has projects with streams of income going forward 20 years for example and I think it would be legitimate to spread any deficit recovery over a long period.
	"The problem is that (a) many schemes are in deficit which do not have a strong covenant"—
	a strong employer behind them, as this particular one I am talking about does—
	"and (b) the entire thrust of regulation seems to be to crystallise the problems rather than recognise that, as with banking crises, policies have to nurse the system to a point at which more radical security measures can be put in place. This requires quite subtle regulation and some long term thinking.
	"Do not get me wrong. I am not arguing for evading the problem but . . . for those of us in the middle of the deficit hole and in financially viable companies, policy needs to ensure that we are taking measures that will lead to solvency in the mid term and then we should be regulated so that it will never happen again. Unfortunately, the [present] thrust of policy seems to be the reverse".
	That sums up clearly what the big, solvent companies with strong backing are doing. It would be a real kick in the teeth for them to carry on with what is in effect a flat-rate basis any longer than necessary.
	The noble Baroness talked about a chasm between us. Let me make it clear that on this amendment and on the thrust of these amendments, we are bound together with the noble Lord, Lord Higgins, with hoops of steel.

Baroness Hollis of Heigham: My Lords, perhaps there is a profound misunderstanding between us. The noble Lord, Lord Oakeshott of Seagrove Bay, said that companies should not have to have a flat-rate levy any longer than they have to. Fine. After the initial one-year period it is entirely in their hands. If they wish to produce the information required for the valuation so the regulator of the board can determine what their levy would be, they may do so. The assumption here is that the Government are delaying them going into a risk-based levy when they wish to do so. That is not true.

Lord Oakeshott of Seagrove Bay: My Lords, let me explain the issue to the Minister. One cannot have a situation after the first year where some companies effectively are able to go on to a risk-based scheme and others are not. The people paying the risk-based levy at that time will not be paying the right rate. Everyone has to go over to it all together; that is obvious.

Baroness Hollis of Heigham: My Lords, on the contrary. That is exactly the point in dispute between us. It will certainly be the case that during the transitional period there will be a mixed economy in which all schemes will have some scheme-based levy and others will carry, by choice, a risk-based element. It is clear that insofar as the good companies seek the risk-based element in the hope of reducing their premium, this will have an adverse selection effect on the scheme-based levy for the rest. However, that is the choice of those companies—the very same companies quoted by noble Lords opposite. They have precisely that option and that flexibility now. The amendments produced today are built on a false hypothesis that it is either one or the other—flat rate or risk.
	No, my Lords; that is not the case. I have circulated at least three trees' worth of paper on this. After the initial year—we have just discussed the date—we shall phase in over the transitional period the risk-based levy; that is why it is called a transitional period. We would expect companies to come within that on a three-year valuation cycle. If they feel they wish to bring that valuation cycle forward, they can do so, once the risk-based factors have been determined which is what the first year will be spent doing. Thereafter they will be able to go on to the risk-based levy.
	The noble Lord is exactly right. He may well find a large company with 100,000 members that is well run and well funded with a secure employer coming on to a risk-based levy in year two or year three. It will have judged, probably accurately, that the collective levy will reduce accordingly. Another company, also as large but with a funding deficit and a struggling employer, will decide that it is better off remaining with a scheme-based levy as long as possible since, once the risk-based levy comes in, it will find that its premiums go up as a result.
	We want to accelerate movement to the risk-based levy. There is no difference between us. Therefore the industry will have to address these adverse selection issues as it sees fit. It is not the Government saying they cannot move on to a risk-based levy. After year one, they can, but it is up to the companies to determine their entry to the scheme rather than for the Government to lay it down.
	I have to say I am very surprised. We could almost be exchanging positions here. I would have expected the Opposition to say that individual companies should determine whether they go into the risk-based levy since they alone will know, when they have their valuations and make the judgment call, whether they wish the arrangement to be flat rate or some combination of the two elements. Instead, we would deny that flexibility or judgment call to companies and, if we followed this amendment, we would impose a straitjacket on how companies best see the way forward in terms of responding to this levy call. Members opposite have got it wrong. They seem to think that it is either one or the other. It is not. There is a phase-in period during which those companies that wish to do so can bring themselves into the risk-related levy ahead of the terminal point of the transitional period.
	Why do Members opposite want to tell companies when they can enter the scheme? We are not doing that. We are saying that they can come into it as they see fit. I cannot believe that Members opposite, who say they are speaking for the industry, want to impose a government-ordained timetable as opposed to allowing companies to determine their own.
	However, that is a bigger issue. I had not meant to say anything about it but there is such a profound misunderstanding of how the transitional arrangements will operate that I thought it was worth sharing my perceptions with the House. I shall now formally deal with the contents of the amendments.
	The amendments would require the board to collect at least 80 per cent of the levy through the risk-based pension protection levy. Yes, as soon as maybe, I agree, but I cannot support the amendments, for reasons that I shall come to later. They would require the board to recover its administrative costs through the scheme-based pension protection levy and prevent it exceeding the administration costs—but the problem is that if you have very small schemes of two or three you will actually exceed the money you collect—and they would give the Secretary of State and Parliament control over the total amount of levy the PPF board could collect in any given year.
	The approach to calculating the risk-based pension protection levy as the responsibility of the board has yet to be finalised. While we expect the risk-based levy to account for approximately 80 per cent of the levies, certainly by the time the transitional period is complete, in advance of the methodology being established it would be extremely unwise to restrict the board's flexibility in setting the levy's structure. For example, until it is known how the risk-based levy is to be determined, it is uncertain how much the worst-run, most underfunded schemes will be required to pay simply because of the problem of adverse selection. The noble Lord, Lord Oakeshott, identified that problem but is not willing to follow through the consequences of his remarks.
	In order to prevent those schemes being landed with an unsupportable charge—a risk identified by NAPF—it may be necessary to impose a scheme-based levy of a value greater than 20 per cent in order to avoid the floor and ceiling of the risk-based levy being so wide that it would produce a scheme-based levy that is unacceptably low.
	Conversely, the way in which the risk-based levy is calculated may enable the board to collect more than 80 per cent of the levy. Again, the amendments would prevent that. The amendments would freeze us into 80 per cent to 20 per cent, even though the smaller schemes—the two person schemes, the three person schemes—which you may wish to keep on a scheme-based levy would then be faced with costs wholly disproportionate given the way in which adverse selection has worked. Companies which would do well out of the risk-based levy have pulled out of contributing in the way in which they would under a flat-rate scheme.
	We appreciate the importance of a risk-based levy in ensuring that the charge on well-run schemes is fair. That is why we have stipulated that the risk-based levy must form a minimum estimated 50 per cent of the total amount to be collected. We believe that will strike the right balance. But we are dealing with a zero-sum game—that is what adverse selection is all about. If some companies pay less, others will pay more. If the noble Lord's amendments are carried, it could make some struggling firms face an unacceptably high levy.
	I now move to the second part of the amendments. I shall explain why we do not want the scheme-based pension protection levy to be linked to the PPF's administrative costs. I do not believe either noble Lord spoke to this issue—I agree that it is less of a blue sky issue than the one we have been discussing—but it may be worth spelling out our thinking on this and explaining why we are unable to accept the amendment.
	As set out in Clause 115, the administrative costs of the board will be met by a grant in aid paid by the Secretary of State, which the Secretary of State will then recover through an administrative levy. This is quite separate to the pension protection levies with which Clause 175 and these amendments are concerned. This separation is important—as it is for other non-departmental boards—because it provides a clear demarcation between the expenditure and the income used to pay compensation, which is paid for by the levy, and the expenditure and income which is used to pay the administrative costs of the board.
	The differing ways in which we are approaching this issue provides an important accounting clarity for the House. It will enable Parliament to scrutinise more closely the accounts of the PPF, which I am sure we will all welcome. It is worth noting that most of the executive NDPBs which operate at arm's length from government in the way in which the PPF will operate are funded in this way. Indeed, OPRA was set up and funded in this way, and the regulator will continue in a similar manner. I am sure that noble Lords do not want us to introduce a new method of funding other than the one we have for OPRA and other NDPBs. It would be unreasonable.
	We expect that the scheme-based pension protection levy will have a particular role to play in ensuring that the application of the risk-based levy to struggling schemes does not result in an overall charge that is unsupportable. The amendments would ensure that the scheme-based pension protection levy could not exceed the administrative costs of the board. This would prevent the board using the scheme-based levy to control those unsupportable charges because, when compared to the overall levy, the estimated administrative costs of the board are insignificant. The board would therefore be forced to adjust the way in which it calculates the risk-based protection levy to take account of this. Again, that would be highly undesirable.
	I have assumed that the third part of the amendments is intended to give the Secretary of State and Parliament control over the amount of levy the PPF board could collect in any particular year. Neither noble Lord addressed this point in their opening remarks but, given that your Lordships will be seeking, no doubt, to test the opinion of the House, it seems proper that I should specify what is going on in this area. The amendments would require the board to tell the Secretary of State what it estimates it will collect through the levies in the coming financial year. The intention is that if there was any change the Secretary of State would have to seek Parliament's approval via regulations. We believe that preventing government interference in deciding the rate of the pension protection levy is absolutely essential.
	Again, I am surprised. I would have expected noble Lords on the other side of the Chamber to say exactly the opposite to what is in the amendment. It flies in the face of everything they say about "arm's length", "industry money" and "keep government out". Now they are trying to bring the Government back in. I cannot believe that is what they want to do.
	The board of the PPF will be best placed to know what levy rate it needs to secure current and future liabilities. That is what the board, with its expertise, is meant to assess. We believe that the Government have no place in that kind of decision because political concerns could override what is best for the PPF. Indeed, the noble Lord, Lord Lucas, pressed me only three hours ago to say that there should be no political interference by government. That is until it suits the opposition amendments, whereupon we can have political interference by government. That cannot be sensible or decent.
	I know we are all concerned about the possible impact of these freedoms on the levy payer. They are understandable concerns. But your Lordships know what safeguards are in place to prevent the board using any powers inappropriately in terms of the cap on the limit the board can raise and the total amount that it can raise. These controls are reflected in Clause 175, as your Lordships will know.
	I could expand on these points, but I hope that I do not need to. Your Lordships know perfectly well the pattern of capping in terms of the levy that can be raised. We do not need the Secretary of State to do it; it is already there in the Bill, in the schedules and in the regulations.
	I ask Members opposite to consider this. We have an initial one year—now with a fixed date, which obviously we shall try to honour—of a flat-rate levy. We are also saying that over the next four years or thereabouts the risk-based levy will be phased in. It will have to be phased in on the basis of the three-year accounts, but any individual company can choose to come on to the risk-based levy earlier than that if they wish by having a valuation out of time. It is their choice if they want to pay for it. To ask all small companies to go for valuation out of time in year one or year two to get onto the risk-based levy would add something like £100 million in valuation costs to 50,000 schemes, many of which are quite small in number—two member, five member, 10 member.
	That is not the Government's approach. We are saying that by the end of this transitional period companies will be on a balanced levy, largely risk based but partly scheme based. How quickly they come on to the risk-based levy will be for them, not the Government, to determine. It is their choice; the companies decide. The opposition amendment seems to state, "No. Companies do not know what is the best thing for them. The Government will tell them what to do". I do not hold that position. We have built this Bill on consensus with the industry and I am confident that the industry would prefer to determine when it goes on to the risk-related levy. The opposition amendments would not permit that to happen.
	I invite Members opposite to think through the implications of government interference in the timetable of when companies come onto the risk-related levy; government interference in terms of reporting on how the board may or may not cap the money raised and so on. If we are not careful we will be turning the PPF into an arm of government rather than, as we all wish, an arm's length body funded by the industry for the protection of scheme members in ways best structured to avoid moral hazard. I think that the Opposition amendments begin to subvert that thrust. To go for this would be very unwise, so I hope that your Lordships will reject the amendments.

Lord Higgins: My Lords, I listened with great interest to what the noble Baroness said, but I am somewhat puzzled by the initial part of her remarks. They seemed to be based on the assumption that the Government won the last vote, and that is not so.

Baroness Hollis of Heigham: My Lords, there has been a misunderstanding, which is why I was talking about chasms between two noble Lords opposite on what the last vote did. Instead of saying that the initial period would last about a year, which was the Government's intent, the amendment puts a date of 31 March 2006 on it. So when the Bill receives Royal Assent and comes into force, we hope, from the beginning of April 2005, there will be one year for a flat-rate scheme for everybody. That was what the last vote did.

Lord Higgins: My Lords, that was the result of the vote on Amendment No. 208, but we have voted on another amendment since then. That said that the levy should be a flat-rate levy and have a risk-based element as well. In a sense, this debate is a consequence of the vote we have just had; namely, that there should be both a scheme-based levy and a risk-based levy, and that the proportion between the two is such that the risk-based element should be at least 80 per cent. This is what we are saying.

Baroness Hollis of Heigham: My Lords, that is not what the noble Lord, Lord Oakeshott, said. He talked about not wanting a flat-rate levy, about it being all or nothing, so to speak—you cannot have some companies included and some not—and about wanting the risk-based levy virtually immediately. That was what I was arguing against.

Lord Oakeshott of Seagrove Bay: My Lords, I said that after a year it should be 80 per cent risk based. That is the key.

Baroness Hollis of Heigham: Forgive me, my Lords, I know this is not Committee, but we are not arguing about the year. The difference between us is whether, after that year has elapsed, companies go immediately on to the risk-based levy or whether they do so as they see fit.

Lord Higgins: Again, my Lords, that is what we debated on the previous amendment, which was carried. We are effectively debating a consequential proposal; namely, if we go after the initial period to a system, one component of which is scheme-based and the other risk-based, then the proportion between the two is such that the risk-based element should not be less than 80 per cent. That is what this amendment is about.
	The other thing that puzzled me in the noble Baroness's remarks was that she quoted the NAPF as being against Amendment No. 217A, which we believe to be superior to Amendment No. 212. However, my understanding is that the NAPF is entirely in favour of what is suggested in Amendment No. 217A.

Lord Oakeshott of Seagrove Bay: Absolutely, my Lords.

Lord Higgins: My Lords, that view is confirmed by the noble Lord, Lord Oakeshott.
	We listened with interest to what the noble Baroness said, but we are not persuaded, for the reasons which I have just mentioned, and hope to take the opinion of the House.

Lord Lea of Crondall: My Lords, before the noble Lord sits down, I do not hear him respond to the point that this is a major responsibility of the board. However one does this, its responsibility is to make an assessment based on what I think my noble friend described as a zero sum game. I do not think that the noble Lord has answered that point about the board's responsibility.

Lord Higgins: My Lords, we are seeking to set out what seems to us a reasonable basis on which to set up the situation in the relationship between the Government and the board. That is what we have done. I beg to take the view of the House.

Lord Lyell: My Lords, the Question is that Amendment No. 212—

Lord Higgins: My Lords, I am sorry. I wish to withdraw the amendment which, as I indicated earlier I think is inferior to Amendment No. 217A, and to vote in due course on Amendment No. 217A.

Lord Lyell: My Lords, I am much obliged to the noble Lord.

Lord Higgins: My Lords, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 213 to 216 not moved.]
	Clause 175 [Amounts to be raised by the pension protection levies]:
	[Amendment No. 217 not moved.]

Lord Higgins: moved Amendment No. 217A:
	Leave out Clause 175 and insert the following new Clause—
	"AMOUNTS TO BE RAISED BY THE PENSION PROTECTION LEVIES
	(1) Before determining the pension protection levies for any financial year after the initial period, the Board must estimate an amount which will reimburse as nearly as possible its total costs of administration and must determine the rate of scheme-based pension protection levy to raise that amount.
	(2) The Board must also estimate the further amount to be raised by the risk-based pension protection levy it intends to impose.
	(3) The Board must impose levies for a financial year in a form which it estimates will raise an amount not exceeding the levy ceiling for the financial year.
	(4) The risk-based pension protection levy must amount to at least 80% of the total amounts estimated to be raised by both levies.
	(5) The Board must notify the Secretary of State of its estimates and the levies it intends to impose at least three months before the beginning of each financial year in which those levies are to be imposed.
	(6) In order to vary these proposed levies, the Secretary of State must lay regulations before Parliament before the start of the relevant financial year.
	(7) For the first financial year after the initial period, regulations may modify subsection (3) so as to provide that the reference to the levy ceiling for the financial year is to be read as a reference to such lower amount as is prescribed.
	(8) For the second year after the initial period and for any subsequent financial year, the Board must impose pension protection levies in a form which it estimates will raise an amount which does not exceed by more than 25% the aggregate of the amounts estimated under subsections (1) and (2) in respect of the pension protection levies imposed for the previous financial year.
	(9) The Secretary of State may by order substitute a different percentage for the percentage for the time being specified in subsection (8).
	(10) Before making an order under subsection (9) the Secretary of State must consult such persons as he considers appropriate.
	(11) Regulations under subsection (7), or an order under subsection (9), may be made only with the approval of the Treasury.
	(12) In this section "risk-based pension protection levy" and "scheme-based pension protection levy" are to be construed in accordance with section 173."

Lord Higgins: My Lords, as I indicated a moment ago, I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 217A) shall be agreed to?
	Their Lordships divided: Contents, 136; Not-Contents, 106.

Resolved in the affirmative, and amendment agreed to accordingly.
	Clause 177 [Valuations to determine scheme underfunding]:

Baroness Hollis of Heigham: moved Amendment No. 218:
	Page 133, line 41, after "Board" insert "or the Regulator on the Board's behalf"
	On Question, amendment agreed to.
	Clause 179 [Calculation, collection and recovery of levies]:

Baroness Hollis of Heigham: moved Amendments Nos. 219 to 221:
	Page 135, line 9, leave out "a financial year" and insert "the period for which the levy is imposed"
	Page 135, line 11, leave out "year" and insert "period"
	Page 135, line 12, leave out "the year" and insert "that period"
	On Question, amendments agreed to.
	Clause 187 [Fraud compensation levy]:

Baroness Hollis of Heigham: moved Amendment No. 222:
	Page 142, line 36, at end insert—
	"(6A) The Board must in respect of any fraud compensation levy imposed under this section—
	(a) determine the schemes in respect of which it is imposed,
	(b) calculate the amount of the levy in respect of each of those schemes, and
	(c) notify any person liable to pay the levy in respect of the scheme of the amount of the levy in respect of the scheme and the date or dates on which it becomes payable.
	(6B) The Board may require the Regulator to discharge, on the Board's behalf, its functions under subsection (6A) in respect of the levy."
	On Question, amendment agreed to.
	Clause 188 [Information to be provided to the Board etc]:
	[Amendment No. 223 not moved.]
	Clause 189 [Notices requiring provision of information]:
	[Amendment No. 224 not moved.]
	Clause 190 [Entry of premises]:
	[Amendment No. 225 not moved.]
	Clause 192 [Warrants]:

Baroness Hollis of Heigham: moved Amendment No. 226:
	Page 147, line 2, leave out from third "to" to "and" in line 4 and insert "the sheriff,"
	On Question, amendment agreed to.
	[Amendment No. 227 not moved.]
	Clause 195 [Restricted information]:

Baroness Hollis of Heigham: moved Amendments Nos. 228 to 230:
	Page 147, line 32, leave out from beginning to "restricted"
	Page 147, line 37, leave out "except" and insert—
	"(1A) Subsection (1) is subject to—
	(a) subsection (1B), and
	(b) sections 196 to 201 and 233.
	(1B) Subject to section 200(4), restricted information may be disclosed"
	Page 148, line 18, after "of" insert "subsections (1) and (1B) and"
	On Question, amendments agreed to.
	Clause 199 [Other permitted disclosures]:

Baroness Hollis of Heigham: moved Amendment No. 231:
	Page 149, line 40, at end insert "or of the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)),"
	On Question, amendment agreed to.
	Clause 200 [Tax information]:

Baroness Hollis of Heigham: moved Amendment No. 232:
	Page 151, line 11, leave out from "Sections" to "except" in line 12 and insert "195(1B), 196 to 199, 201 and 233 do not apply to tax information which is disclosed to the Board as mentioned in subsection (3), and such information may not be disclosed by the Board or any person who receives the information directly or indirectly from the Board"
	On Question, amendment agreed to.
	Schedule 9 [Reviewable matters]:

Baroness Hollis of Heigham: moved Amendment No. 233:
	Page 323, line 30, at end insert—
	"29 Any determination by the Board under section 187(6A)(a) (occupational pension schemes in respect of which any fraud compensation levy is imposed) or the failure to make such a determination.
	30 The amount of any fraud compensation levy payable in respect of an occupational pension scheme determined by the Board under section 187(6A)(b)."
	On Question, amendment agreed to.
	Clause 214 [Publishing reports etc]:

Baroness Barker: moved Amendment No. 234:
	Page 161, line 36, leave out "absolutely privileged" and insert "privileged unless the publication is shown to be made with malice"

Baroness Barker: My Lords, moving on to a different subject altogether, the purpose of this amendment is to establish why the PPF ombudsman should have a right of absolute privilege and to suggest that he should not. The clause provides that for defamation purposes any matter published by the PPF ombudsman shall be "absolutely privileged". Elsewhere in the Bill, in Clauses 87 and 203, privileges are conferred on the regulator and the board of the PPF respectively, but those privileges are not absolute but qualified.
	It is not immediately obvious why those other bodies should have qualified privilege when the PPF ombudsman has absolute privilege, and I await the Minister's explanation for that. Absolute privilege is very wide-ranging and places an emphasis on freedom of speech above any person's right to an action for defamation. We believe that absolute privilege for the PPF ombudsman goes too far and that the balance between freedom of speech for the ombudsman and the protection of the reputation of those mentioned in his or her response is wrong.
	We agree that the ombudsman should be able to express his or her views freely, but we cannot see why he or she should be able to publish defamatory statements that are motivated by malice. We do not believe that it is necessary or desirable to grant an absolute privilege to the ombudsman to achieve the object of enabling him to do his work. Therefore, in this amendment we suggest that the clause be amended to delete the absolute privilege and insert a qualified privilege—that is, a privilege for publication unless the statement is shown to have been made with malice. I beg to move.

Baroness Hollis of Heigham: My Lords, it may be helpful if I explain the intention behind Clause 214, which provides for any matter published by the PPF ombudsman to be absolutely privileged for the purposes of defamation. This includes reviewable matters or maladministration and extends to the ombudsman's annual report.
	The noble Baroness asked why we had chosen those words, rather than more qualified words. The provision is broadly equivalent to the one in place for the Pensions Ombudsman now, under Section 151 of the 1993 Act. We are doing nothing particularly new here but are broadly rolling over an existing provision. I accept that this provision is slightly different from the provisions for the Pensions Regulator and the PPF board under Clauses 87 and 203, where we have said that any publication is privileged unless the publication is shown to be made with malice. That is because those bodies—particularly the board—are not quasi-judiciary, whereas the ombudsman is.
	Clause 214 began its life as an opposition amendment, Amendment No. 535, in the other place. When the amendment was tabled by the Opposition, it proposed "absolute privilege". The Government took the Opposition's concerns on board and came up with this amendment. I believe that the remarks of Peter Carter-Ruck have already been read into the record.
	With the explanations that the amendment originated from the Opposition in the other place, that we believe that the ombudsman is different from the PPF board and the regulator because he has a quasi-judicial function and that the provision is, broadly, a rollover from the provision in the 1993 Act, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Barker: My Lords, I thank the Minister for that reply. I take what she says about the ombudsman being in a quasi-judicial position. That has more force as an argument than saying that the provision is already in the 1993 Act for the Pensions Ombudsman. There is still a question in my mind on whether it is appropriate in practice to give such a blanket degree of privilege. However, I listened to what the noble Baroness said and shall take the matter away and think about it again. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 220 [The statutory funding objective]:
	[Amendment No. 234A not moved.]
	Clause 233 [Supply of information for purposes of section 232]:

Baroness Hollis of Heigham: moved Amendment No. 235:
	Page 172, line 34, at end insert—
	"(6) This section is subject to sections 86 and 200 (tax information disclosed to the Regulator or the Board)."
	On Question, amendment agreed to.
	Clause 236 [Information and advice to employees]:

Lord Higgins: moved Amendment No. 235A:
	Leave out Clause 236.

Lord Higgins: My Lords, in Committee we expressed some concerns about Clause 236. We are all in favour of employees having as much information as possible, but it is very important that they should not receive information that leads them to make mistaken decisions. By regulation, the clause,
	"may require employers to take action for the purpose of enabling employees to obtain information and advice about pensions and saving for retirement".
	We are concerned that that puts the onus on the employer. It is extremely difficult for employers who are not technically qualified to give information and advice to carry that into operation.
	A debate in Committee was concerned with the problems that trustees have—they had it in Equitable Life, for example—in giving advice to their employers. The clause seems to say that employers, but apparently not pension fund trustees, will be enabled to give advice about pensions and savings. The noble Baroness shakes her head. If it is so, no doubt she will say so in a moment.
	We have serious doubts about whether it is practical for employers to fulfil the functions specified. The noble Baroness was kind enough to say earlier that the regulations involved in the Bill were now in draft form and that, as on previous occasions, she would courteously enable us to see them. I was not absolutely clear whether that remark was made in the context of the Bill as a whole—whether all the regulations were in place—but she shakes her head. I did not think that it could be so; I imagined that she was referring to the clause that we were debating at the time.

Baroness Hollis of Heigham: My Lords, I was lucky. The regulations for which the noble Lord, Lord Skelmersdale, asked were ones that we had ready to offer for scrutiny. I am not so fortunate with the other regulations yet.

Lord Higgins: My Lords, we hope that the noble Baroness will be as successful as she can be, as she has always been very courteous.
	My main concern about the clause is the use of "advice". Perhaps it would have been more appropriate had our amendment, instead of leaving out the whole clause, merely left out "and advice". However, the regulations, of which we know nothing at the moment, may impose very considerable burdens on employers if they are required to give even information on pensions and saving for retirement. After all, it is not their function, although it may be the function of the Department for Work and Pensions. To put the onus on employers seems likely to be an excessive burden. I beg to move.

Lord Lea of Crondall: My Lords, the clause is very important if we are looking to the future. The Turner report and all that goes with it would make for a much wider debate than falls within the scope of the Bill. The advice that in the broader national sense goes to people is to save more, to have more faith and trust in the pension arrangements being made, to respond to what employers say and so on. Can anyone doubt that a major qualitative step forward is required in the arrangements if people are to trust and believe in that on which they are told to embark?
	There have been so many schemes that, for a variety of reasons, have caused people to get into difficulty. It is difficult territory and I suspect, although I may be wrong, that the noble Lord, Lord Higgins, is worried about the word "advice" in the sense of getting into legal difficulties about the giving of individual advice. The noble Lord is shaking his head. Again, that cannot be a reason, if we are looking at the future, for an employer not to be in a position where the concrete reality of increased savings and so on for the people involved starts to constitute something that we can call "advice". Whether or not that word has technical connotations that cause a problem here, the principle of the clause, which is not just an add-on, is vital and indispensable, the more we look at the changing demands of savings for people at work.

Baroness Wall of New Barnet: My Lords, perhaps I may contribute to the debate as someone who has come late into the House and not been party to the whole discussion, and as someone who has negotiated on pensions for many years as a trade union official, including with Norwich Union, ICI and other organisations. They would be concerned about implementing the amendment.
	Clause 236(1) states:
	"Regulations may require employers to take action for the purpose of enabling employees to obtain information".
	Most employers would not be qualified under the Financial Services and Markets Act to do so anyway, but in my experience of negotiating with employers in a partnership arrangement, it is most likely that they would see it as part of their social responsibility towards their employees to ensure that any information that was helpful to them was made available. In many instances they provide that on the premises and make arrangements for that to happen. So I cannot see any way forward other than to welcome this clause.

Lord Oakeshott of Seagrove Bay: My Lords, I am not sure how much difference there is between the different sides of the House in this matter. I am struck by the good sense of the contributions made from the Government Benches. But in practice there seems to be a possible, rather technical, problem with "advice". It was noticeable that the noble Baroness, Lady Wall, said "information". I would have thought that the right compromise was to stick to "information" and take out the term "and advice" which has a slightly technical ring.

Lord Fowler: My Lords, I agree entirely with the comments of the noble Lord and the noble Baroness who have just spoken. The House needs more information on the Government's intention. In principle I am entirely in favour of enabling employees to obtain the maximum amount of information and to receive advice—a point to which I shall return in a moment. Without wishing to be unduly controversial, one of the Government's failures has been that they have not encouraged sufficient saving over the past few years. That is a great pity and future generations will pay for that.
	My concern is about the practicality of the clause, a point mentioned by my noble friend Lord Higgins. The noble Baroness, Lady Wall, referred to Clause 236(1), which states:
	"Regulations may require employers to take action for the purpose of enabling employees to obtain information and advice about pensions".
	It is regarding that word "advice" that one really wants to find out exactly what is envisaged. Is it envisaged that employers will be required to give advice? The Minister shakes her head, but I notice that subsection (2)( c) makes,
	"provision as to the action to be taken by employers".
	What will that action be? Employers will rightly be concerned, as should employees for that matter, about any legal liability which would then be involved. In principle I find myself in sympathy with the way in which this is moving. In practice, I need to be reassured that it will not have effects that the Government do not intend.

Baroness Hollis of Heigham: My Lords, this has been an interesting debate. I am particularly grateful for the contributions of my noble friends who, as former trade union officials or, indeed, staff members, speak with real expertise on this issue.
	There may have been a little misunderstanding here. I thought that my noble friend had clarified matters to the satisfaction of Members opposite, but perhaps that was not the case. The clause provides a reserve power to require certain employers to provide their employees with access to sources of information and advice about pensions and savings for retirement. That is very clear. It does not say that regulations may require employers to "provide" information and advice; it states that they must,
	"take action for the purpose of enabling employers to obtain information and advice".
	The clause is drafted in exact terms precisely to avoid the understandable concerns that noble Lords may have about where the liability lies.
	What is going on here? If one reads this across to the regulatory impact, I think that the situation is clear. If employers make little or no contribution to their employees' pensions—that is, less than 3 per cent but usually nil—in consequence, there will be low levels of scheme membership.
	Perhaps I may digress for a moment. I think that I am quoting the figures broadly accurately when I say that L&G has shown that, where employers contribute to stakeholder pensions, take-up by members is between 70 and 80 per cent; where they do not, the take-up by members is 13 per cent. Therefore, the degree of employee saving is conditioned by the actions of the employer in the workplace. That is not to say that the employer must be responsible for giving advice—nor should he be, unless he is a licensed IFA, which is extremely unlikely.
	In that situation, we believe that employers who fail to provide a contribution to a pension scheme should, at the very least, have responsibility for ensuring that their employees have access to the information and advice that they need in order to make informed retirement planning decisions. We are currently carrying out the scheme on a pilot basis. It will be rolled out and then, if your Lordships' House agrees, we shall have the reserve powers to extend it nationally.
	A significant number of employees work for such firms. Around 6 million employees work for firms that offer contributions of less than 3 per cent to at least some of their workforce, and most are working in firms that make no contributions at all. As a result, pensions are simply not on those employees' radar screens. From all the research that I have read, I know that the real push into pension provision comes about when it is focused on within the workplace. Therefore, removing this clause would remove an opportunity to help employees who would benefit most from access to pension information and advice.
	This is a reserve power. It is broad, and any regulations will go through the affirmative procedure so that they can be scrutinised by both Houses. I think that that is proper. Proposals for regulations would also be subject to consultation with all interested stakeholders, such as the representatives of employers, employees, consumers, pensioners and the financial services industry. Of course, any employer who does not wish to go down the route of enabling employees to have access to information and advice can take himself out of the frame by making a 3 per cent contribution to a pension. If that encourages employers who currently do not do so—particularly for stakeholders—then that is a not unintended consequence of what the clause seeks to achieve. Employers have that choice.

Lord Fowler: My Lords, is the request for this information and advice—perhaps the noble Baroness will say where the advice will come from—triggered by the employee or is it given compulsorily to all employees who are not covered?

Baroness Hollis of Heigham: My Lords, we have various pilots which deal with information packs, and so on, and I am happy to write to your Lordships about the different types available. But basically, under the Bill, any employer who does not make contributions of at least 3 per cent to a scheme will have a duty—once the reserve powers through regulations may be extended—to provide his employees with information and advice. The information could be a factual pack that the employer puts together. Beyond that, however, it is the territory of independent financial advisers. Only they are regulated to provide financial advice.
	So, as my noble friend absolutely rightly picked up, the wording of the clause is not that the employers must provide financial advice and information, but that they must enable employees to have financial advice and information. The understandable concern expressed by the noble Lord, Lord Higgins, about whether they would be accountable for mis-selling would not arise in this case. It would be a matter for the IFA.
	As I say, we would expect the sessions to be delivered face to face and in private by an independent financial adviser and to follow the current financial services industry practice. They will be driven by the individual employee's requirements and deal with what they need and the connections with state benefits and so on.
	Employers would not be liable because the pension information packs will set out what employers may and may not say to their employees. The packs can provide factual information about what the employers currently offer, but they are not entitled to give advice. Employees will be given access, but there is no requirement that they must attend. In other words, the duty will be on the employer to offer, not on the employees to receive; they may have a perfectly comfortable personal pension and want nothing to do with it. So they can decide not to attend.
	I hope that, in a slightly more conversational way, I have addressed all the concerns that your Lordships have raised. We know that if people do not have access at the right time to information about pensions and savings for retirement, they do not take it up. That point can also be seen in the context of some of the Secretary of State's comments on issues such as auto-enrolment. It is all part of trying to persuade employees to value pensions and to say to employers who have chosen not to contribute—which would make me very sorry—that they should at the very least provide in lieu the alternative of information and access to financial advice. I hope that that helps your Lordships.

Lord Higgins: My Lords, it was helpful to have the noble Baroness put those comments on the record. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 239 [Requirement for member-nominated trustees]:
	[Amendment No. 236 not moved.]
	Clause 241 [Member-nominated trustees and directors: supplementary]:

Baroness Hollis of Heigham: moved Amendment No. 237:
	Page 178, line 16, at end insert—
	"(A1) The Secretary of State may, by order, amend sections 239(1)(a) and (4) and 240(1)(a) and (4) by substituting, in each of those provisions, "one-half" for "one-third"."

Baroness Hollis of Heigham: My Lords, in moving Amendment No. 237 I shall speak also to Amendments Nos. 238 and 298.
	When we debated the clauses on member-nominated trustees and directors in Committee, the Secretary of State had that very morning announced at the TUC conference that the Government intended to raise the minimum proportion of member-nominated trustees from one third to one half. I said at that time that what we expect and hope to see in the reasonably foreseeable future is that all schemes will have 50 per cent member-nominated trustees. I have been going round meeting chief executives of blue chip companies and have often been told by those who have 50 per cent member-nominated trustees just how valuable their contribution is.
	Amendment No. 237 will allow us to make that change. Everyone agrees that member-nominated trustees and directors are a good thing. They bring value to any trustee board by offering a different set of skills and experience and by bringing a different perspective to bear on trustee discussions and decisions.
	We think that it is right that we should proceed down this path. I would remind your Lordships that we have general powers in Clause 313 which would allow us to implement the change at different times and in different ways for different types of scheme. This provision will give us the opportunity to work with the industry to determine the best way of meeting the challenge of moving to 50 per cent MNTs, which is something that we intend to do. We will certainly give time for the new provisions in the Bill to bed in before moving to 50 per cent MNTs. In other words, we will move to it over time.
	In Committee, the noble Lord, Lord Oakeshott, in supporting the principle of an equal proportion, suggested that some flexibility might be needed in certain circumstances. He cited the case, I think, of schemes with independent trustees in particular. I think that that is a genuine issue and we are looking at it. However, my thinking on this is that we would expect an independent trustee to be, so to speak, ring-fenced outside the divvying up of the rest of the board membership. However, we will look at that. Your Lordships will know that we have the power in Clause 241(1)to modify application of the provision in prescribed cases, and schemes with independent trustees could well be such a case.
	The amendment to Clause 314 will require any order to be subject to affirmative resolution, as I am sure your Lordships would wish. We are moving towards 50 per cent MNTs, but we have made no decisions yet on timing. There are issues of detail to be resolved, including the independent trustees. I have tried to give the noble Lord some indication of our thinking. It is a perfectly proper and important consideration, but we shall consult fully on all these issues in the coming months. With that explanation, I hope that your Lordships will accept the government amendments. I beg to move.

Lord Lea of Crondall: My Lords, those of us who have been arguing for this for some time—my noble friend Lady Turner did take the lead—would say that to see this matter almost reaching fruition is a very happy moment indeed. The psychology of this matter is tremendously important. I repeat the wider point that I made a few minutes ago about the next few years being very difficult for people organising pensions within industry.
	Of course, there is a need for people to take responsibility and ownership. There is no better way for people to take ownership of these difficult decisions than to be equally responsible, with the rest of the people carrying out the work, as trustees. This is not a collective bargaining matter, but it is a matter on which taking joint responsibility means that there is nowhere to hide. I am quite sure that when we come to the final version of the Turner report and various degrees of obligations on companies to do something in this area—it is already at the top of the agenda—it will be a very taxing and challenging matter for people at work. I think that this is a very good foundation stone on which to make this a successful development.

Baroness Turner of Camden: My Lords, I, too, thank the Minister and the Government for the amendment. I referred to it in discussions on previous amendments. I am absolutely delighted that this has happened. We have wanted such a provision for a very long time, not only in this Bill, but the issue has also been raised on previous occasions. I am very pleased that the Government have decided to accede to what is a very reasonable request.
	As my noble friend Lord Lea has said, it involves people directly in the provision of pensions at a difficult time. They will have to be trained to take difficult decisions, but I am sure that they will be very capable of doing so, with the assistance of the training that we know will be provided. I thank the Minister for all she has done to bring this about.

Lord Oakeshott of Seagrove Bay: My Lords, the Minister is right to say that I expressed some sympathy in Grand Committee with the objectives made by, I think, the noble Baroness, Lady Turner, that in many cases it is appropriate and perfectly sensible to have 50 per cent of member representatives or trustees on pension fund committees. But what I did not say, and what I do not agree with, is the idea that it has to be 50 per cent. I find it surprising. I ask the noble Baroness how this has come about. Whether one agrees with having 50 per cent of members is a fairly clear principle.
	Why has it come up in the past few weeks at this very late stage? It could perfectly well have been put forward in the Commons. As she said that very day, what a happy coincidence it is that the new Secretary of State can have a nice big sticky lollypop to take down to his former colleagues at the TUC. I am delighted, although surprised, to hear her say that chief executives of blue chip companies say how happy they are to have a composition of 50 per cent member trustees. I invite the Minister to tell me of one chief executive of a blue chip company who wants to be told in regulation that he has to have such a membership.
	I believe that there is some misunderstanding here. While in many cases it is a good idea to have 50 per cent of the board composed of member trustees, I do not support making it compulsory in this way and I would oppose the amendment.

Lord Higgins: My Lords, the noble Baroness referred to exchanges in Committee. I think that it is true—the noble Lord, Lord Oakeshott of Seagrove Bay, may agree—that we did not see this coming and have not, perhaps, cleared our minds as much as we might have. I did not move the previous amendment because I thought that it might be easier to debate the issue with this government amendment.
	There are one or two points about which we ought not to be confused. There is a growing feeling that there should be pensioner representation on trustee boards, as well as the normal arrangement for members to elect people from the workplace and so on. It is probably a good thing if it is not only those actively in the scheme but those who are retired who have some say in the way in which matters proceed.
	Having said that, there is a big distinction between member-nominated trustees and member trustees. I think that, at the moment, normal practice in most good schemes is for the members to have arrangements for, in some cases, electing their fellow members to serve on the trustee board. In my experience, that can be extremely valuable. There will be an expression on the trustee board of a view that, if the board were made up entirely of technical people dealing with actuaries and everything else, might not be expressed. When I was in that position, I used to say in the strongest terms to any member trustee arriving on the board, "You must realise that you are in the same legal position as everyone else on the trustee board. If we do something wrong, you're as responsible as we are". They need good training. I found that valuable.
	Member-nominated trustees are something else. The members might nominate someone who is not a member of the scheme but has some expertise or represents a particular political viewpoint.

Lord Lea of Crondall: My Lords, I am sorry to interrupt the noble Lord. My question arises from the fact that he said that he was not moving Amendment No. 236. Now that we are on Amendment No. 237, he seems to be concentrating on Amendment No. 236. If that is allowed, we can both engage with the matter.
	Does the noble Lord have examples of situations in which the practice—in any way that is of any significance—has created a political question? I know of no such occasions. We should exercise care before we make such broad statements.
	Some trustees have come from the trade unions. The finance director and the personnel director can be on the board, but how will people who, say, work in a company with several plants throughout the country—quite a big scheme—have any dialogue among themselves, unless there is some framework for consultation among the 50 per cent? That is more important—not less—than the ability of people to have proper input if the position of having the 50 per cent is to work satisfactorily.
	As the noble Lord sees the matter as being integral to Amendment No. 237, we should take it head-on and say, "OK. There will be an opportunity—it will not be compulsory—for people to get other colleagues to be part of their number". That equates to allowing the finance directors and others, as members, to be trustees.

Lord Higgins: My Lords, I have sought to indicate that there are three separate issues: first, whether there should be member trustees on the board—that is to say, members of the scheme—secondly, whether there should be non-members who are nominated by the members; and, thirdly, the issue of percentages. My experience suggests that it can be extremely valuable to have member trustees on the board. I have a more open mind about whether it is advisable for members to nominate outsiders who might have particular expertise.
	I do not know whether the matter is political, but the new Secretary of State certainly seemed to think that it was important to raise it at the TUC conference. Clearly, it was thought to be important at that stage. Based on my experience, I have serious doubts about the 50:50 argument. Employers might be deterred from continuing schemes if they think that the outcome on an issue may be uncertain. Again, I know from experience that there is often conflict between the trustees and the employer. So if we are in a 50 per cent situation, what happens about the chairman's casting vote, for example; who appoints the chairman, and so on? There are real problems.
	I am not against member trustees; I am in favour of them. I am not necessarily against member-nominated trustees. However, the 50 per cent issue raises serious questions. That view was expressed, for example, by the National Association of Pension Funds, which disagrees with the Government on the issue. On this side of the House we think that the amendment goes too far. It may create tensions and problems in schemes. For the reasons also mentioned by the noble Lord, Lord Oakeshott, we are not in favour of the government amendment.

Lord Lea of Crondall: My Lords, I ask the noble Lord to rethink his use of the word "political". I have made the point about the tremendous contribution that people make over the years; that is not on any political basis. The fact that the Secretary of State announced the reform at the TUC conference was no different from his announcing it to the CBI. Would that have made it political?

Lord Higgins: My Lords, that is a very good question; I do not know the answer. However, the Secretary of State might have got a different reception.
	The amendment is a step too far. It will create a considerable number of problems if it becomes general practice. No doubt the noble Baroness could tell us what she thinks the position of the chairman of the trustees will be in those circumstances. Also, will the provision apply just to final-salary schemes or to defined contribution schemes also?

Baroness Hollis of Heigham: My Lords, I do not see how the provision can apply to DC schemes because they do not have trustees. Members will normally buy their package in the marketplace, so to speak. It will apply to where there are trustees of schemes. It depends on whether it is a DC company scheme; clearly, it would not apply to a stakeholder scheme.
	Let us take, first, the canard of what was "political" and the tease about the CBI. It always amazes me that Members opposite think that their views are common sense but the views of those who oppose them are political. It so happened that on the day on which my right honourable friend the Secretary of State addressed the TUC conference, we discussed the issue in Committee—14 September. As noble Lords know perfectly well, the timing of where we get to in the Bill in Committee and on Report is entirely in the Opposition's hands. So the noble Lord opposite chose the day on which we discussed the issue, which happened to coincide with when my Secretary of State announced it at a conference. If that means that there was consensus rather than political confrontation, that is admirable. So the noble Lord greatly assisted my Secretary of State in the timing of the announcement, for which we were grateful.
	The noble Lord raised the "member" and "member-nominated" issue. Our concern is, as the noble Lord has expressed, that a "member" is not necessarily someone nominated by members. As far as I know, he or she could be appointed by the employer. He could be the finance director. It could be that the members, the workers, in the company might have no control over who is on the board because all that is required is members—even the finance or personnel directors are likely to be a member of the pension scheme—as opposed to people who are nominated by the body of members to reflect their interests. That is why there is this distinction that my noble friend has picked up.

Lord Higgins: My Lords, perhaps I may clarify that. I was speaking from experience. In fact, the schemes with which I have been involved made arrangements for the members to elect one or more of their number to serve on the trustee board. But I did not take that to be the debate that we had in Committee, which was that the members would nominate outsiders to serve on the board. If I understand it correctly, that is what the Government have in mind.

Baroness Hollis of Heigham: My Lords, that is my next point. Perhaps we may keep this debate structured. There are two separate issues here. There is the amendment that the noble Lord chose not to move, which refers to "member" as opposed to "member-nominated". My noble friend was right to ask whether we are in fact revisiting a previous issue that the noble Lord chose not to move. The point here is that, under the noble Lord's amendment that he chose not to move, there could be a board made up of members of the scheme, none of whom were "member-nominated". That is why I would have been very happy to oppose that. Almost everyone employed in the entire company—management or otherwise—would be a member of a scheme but not necessarily member-nominated.
	The noble Lord indeed raised his second point in Committee, which was that they could be outsiders. Yes, it is the case that members could choose to nominate as their "voice" on the trustees board someone who is not employed in that scheme. The reason is obvious. There can be quite modest-sized companies in which membership, at least for a time, may feel under equipped through training and so forth to take on all of the responsibilities. They may well wish to stiffen the expertise on their side by bringing in a colleague from outside the company.
	But—this is the key—a member-nominated trustee who is not a member of the scheme has to be approved by the employer. We said that in Committee. It could be that the employer is concerned that the member-nominated trustee who is an outsider works for, say, a rival company, which is perfectly legitimate. The employer has the power to veto without having to give cause, so to speak.
	Therefore, it is within the employer's hands if he thinks that that is unreasonable. I hope that employers will not take that step. Very often, they would much prefer to deal with a professional or a semi-professional, possibly from the trade union movement, who knows what he or she is doing and has a breadth of experience across other similar companies in similar schemes. Ultimately, all such schemes are voluntary. Under Clause 239(5)(c), the employer has a veto. We are going for "member-nominated" rather than "member", although the two may of course overlap considerably.

Lord Higgins: My Lords, is it still 50 per cent?

Baroness Hollis of Heigham: My Lords, we are still holding to 50 per cent. But I made it very clear that we will go to that over time and following consultation. I am not saying that this will be the case, but it could be that it will be banded by size of company. There could be a whole range of ways in which it is introduced. We are not trying to use a shotgun approach to small companies that are not equipped yet to do that. But over time we will move in that direction and expect to see 50 per cent of member-nominated trustees—leaving aside the point about an independent trustee possibly.
	That will enrich the quality of the board and ensure that employees have on their radar screens, if they do not already, the significance and importance of pension provision and will own the problems, the risks, the challenges and the solutions that go with being trustees of that board. So I hope that Members will accept the amendment.

Baroness Wall of New Barnet: My Lords, may I share—

Noble Lords: Order!

Baroness Hollis of Heigham: My Lords, I apologise to my noble friend but I am afraid that when I wind up on a government amendment on Report, that is supposed to be the end of the matter. My noble friend can always say, "Before my noble friend sits down", and offer a brief intervention if she so wishes.

Lord Higgins: My Lords, before the noble Baroness sits down, I should like to be clear about the chairman's casting vote.

Baroness Hollis of Heigham: My Lords, that will be for the rules of the scheme.

Baroness Wall of New Barnet: My Lords, before my noble friend sits down, may I elaborate on the experience that I have already shared with your Lordships?

Baroness Hollis of Heigham: My Lords, my noble friend must ask a question, starting with, for example, "am I aware".

Baroness Wall of New Barnet: My Lords, is my noble friend aware that experience in industry is such, as the noble Lord said, that the management of the board of trustees wants employee representatives to be trained and to understand what they have to do? In a way, the proposal formalises what already happens. For example, a trade union pension expert may, by invitation from the management, advise members on issues. The reservation being felt may be unjustified when the intention of the provision is to ensure that those who participate can do so in a concentrated way.

Baroness Hollis of Heigham: My Lords, I thank my noble friend for that intervention. As a result, I hope that your Lordships will accept the government amendments.

On Question, Whether the said amendment (No. 237) shall be agreed to?
	Their Lordships divided: Contents, 102; Not-Contents, 96.

Resolved in the affirmative, and amendment agreed to accordingly.

Baroness Hollis of Heigham: moved Amendment No. 238:
	Page 178, line 17, after "240" insert "(including any of the provisions mentioned in subsection (A1))"
	On Question, amendment agreed to.
	Clause 255 [Conditions of pension protection]:

Lord Skelmersdale: moved Amendment No. 239:
	Page 187, line 22, leave out from "if" to end of line 23 and insert "the benefits are provided under a money-purchase scheme"

Lord Skelmersdale: My Lords, we now move on to what I hope are less controversial matters. Clause 255 covers the conditions for pension protection when an employee transfers from one firm to another within the same group or, indeed, the company is taken over and the employee transfers to the new company under what is probably its own scheme but, possibly, maintaining the old scheme depending on the conditions of the takeover. This amendment seeks to ensure that the condition that the transferor contributes to the scheme is restricted to money purchase schemes.
	As currently drafted, there are two conditions in Clause 255(2). The first is that the person is an active member—a person in pensionable service. It would apply to a defined benefit scheme, a money purchase scheme or a hybrid scheme. The second condition is that where any of the benefits under the scheme are money-purchase benefits, the employer must have been required to pay contributions in respect of the employee or has done so. In a situation where the scheme is a defined benefits one, but the member pays voluntary contributions applied on a money purchase basis, I believe that the employer is not required to pay contributions in respect of that member as an individual. An employer is only required to contribute to the funding of the scheme as a whole.
	In my view there is a danger that defined benefit schemes are thereby excluded from pension protection. I hope the noble Baroness will tell me this is incorrect. However, on the basis that it is correct, for it to be otherwise, surely it would be logical that the phrase "in respect of the employee" would have to cover an obligation to contribute to the common fund. I would very much like this clarified. I beg to move.

Baroness Hollis of Heigham: My Lords, we are returning to three amendments, the first of which was brought forward in Grand Committee on 14 September. The three amendments are linked and relate to the provision for active members of the transferors scheme, members who are eligible but have not joined that scheme and members who will be eligible after they have served a qualifying period of employment.
	The noble Lords, Lord Higgins and Lord Skelmersdale, have requested that this clause should be amended to provide for benefits under a money-purchase scheme as opposed to any scheme which provides money-purchase benefits. The noble Lords' amendments would do exactly the opposite of what they seek to do. In Committee, the noble Lord, Lord Higgins, said:
	"It was my intention that the amendment would ensure that money purchase options would be included rather than excluded".—[Official Report, 14/9/04; col. GC 381.]
	These amendments would do the opposite simply because they flip flop between the word "schemes" and the word "benefit".
	Let me clarify the situation. The Pension Schemes Act 1993 defines a money-purchase "scheme" as one which provides money-purchase "benefits". However, there are other kinds of schemes, such as salary-related (defined benefit) or hybrid, that also provide money-purchase benefits in addition to, or as an alternative to, salary-related pensions.
	If we amend the clauses that the noble Lords want us to amend to include benefits provided under a money-purchase scheme, this would in effect restrict the requirement to money-purchase schemes only and the requirement would not be complied with in respect of salary-related or hybrid schemes which provide money-purchase benefits.
	These schemes are becoming more popular with employers and employees and we have therefore contemplated upon them. As I said earlier when we were discussing this issue, while drafting the clause we tried to "future proof" it to a degree to ensure that the protection is extended to cover any scheme, the basis of which may be DB but which also provides money-purchase benefits.
	I hope that we are on the same side on this. With that explanation, I hope the noble Lord will feel able to withdraw the amendment.

Lord Skelmersdale: My Lords, I am grateful to the noble Baroness. I shall have to take advice on this. As to the last remark of the noble Baroness that we are on the same side, I am still slightly doubtful about that in this particular respect. I shall read very carefully what she has said and come back to the matter, if necessary, at the next stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 240 and 241 not moved.]
	Clause 256 [Form of protection]:

Baroness Turner of Camden: moved Amendment No. 242:
	Page 188, line 34, leave out sub-paragraph (i) and insert—
	"(i) is certified by the actuary to provide to or in respect of the employee, benefits of a similar value to the occupational pension referred to in section 255(1)(c),"

Baroness Turner of Camden: My Lords, in moving Amendment No. 242, I shall speak also to Amendments Nos. 243, 244 and 245, with which it is grouped.
	These amendments deal with the situation which arises in the case of merger and transfer. As we know, employment rights are largely covered by what is known as the TUPE regulations, the Transfer of Undertakings (Protection of Employment) Regulations dating from 1981. These were introduced to protect the employment rights of employees transferring to another undertaking. Their employment rights are protected but pension rights have not in the past been adequately protected.
	The Bill attempts to deal with this, but not completely adequately in our opinion and in the opinion of my union, to whom I am indebted for this briefing. Further consideration needs to be given to the protection of active members of a scheme, particularly those who are nearing retirement. As the Bill is drafted, such a member in a DB scheme is entitled to membership of a DB scheme providing reference-scheme benefits only, or membership of a DC scheme to which the employer pays matched contributions to a maximum of 6 per cent. At least, I think that is what it is intended should be put into the regulations.
	If the receiving scheme is a DC scheme, the member will be considerably worse off. A 6 per cent contribution into a DC scheme provides worse benefits for an older worker than a 6 per cent contribution for a younger worker. In a defined benefit or a DC transfer, if the contribution rate is set at 6 per cent a young worker may earn a decent income-replacement level but an older worker will not have the time to do that. Of course, in Committee the Minister said that an older employee has already built up accrued rights in the transferring scheme, but there is still a loss of expectation.
	The purpose of these amendments is to try to ensure that the benefits should be as valuable as those which would have accrued at normal retirement age in the old scheme. The mechanism envisaged is that the scheme actuary would certify that future service rights in the new scheme are as valuable. This point has been discussed with one of the union's pensions experts and I am told that it is perfectly feasible.
	Moreover, it is our view that the employer's contribution should be the same pre- and post-transfer. After all, pension benefits have always been regarded—correctly, in my view—as deferred pay. Many people understand this, and sometimes work for a lower salary than they might have got elsewhere simply because they believe that their pension scheme provides for their future security.
	If salary benefits must be maintained under TUPE regulations, it seems right and proper that the right to deferred salary should be maintained as well. Hence, one of the amendments in the group spells out that the employer should not pay less and the employee should not pay more.
	As I said earlier, the intention is to conserve the value of the benefits that accrue in the case of a transfer by merger. I beg to move.

Baroness Hollis of Heigham: My Lords, my noble friend will not be surprised to learn that I shall give her amendments the same cool response on Report that I gave them in Committee. They seek to provide or require there to be broadly comparable pension provision, be that on a salary-related or money purchase basis. Our policy intention is to strike a balance on pension provision where there has been a transfer—a balance between keeping businesses open, where the only option is a transfer and therefore keeping people in jobs, against an element of necessary flexibility in pension provision.
	If we made it mandatory for the transferee to offer broadly comparable provision, it would be complicated and very expensive for some transferee employers. Broadly comparable pension provision does not mean, as one might think, a rough-and-ready equivalent. Actuaries would have to crawl over it, frankly, for it to apply, taking into account the value test, benefits test, actuarial equivalence, pension age, and so on.
	The transferor scheme may not look like anything that the transferee already has running and could result in the transferee employer running two or more different types of scheme, resulting in a two-tier workforce. Alternatively, he may have to adapt his own scheme to fit with that of the transferor—a most unusual position for a firm involved in a takeover.
	This is where both schemes are essentially the same kind—both DB or both DC. It would be virtually impossible for a scheme actuary to provide satisfactory confirmation that DB schemes will provide benefits that are broadly comparable to DC schemes, and vice versa. In salary-related schemes, employer contributions are dependent on a number of conditions, as well as overall membership and funding position. In money purchase schemes, actuaries would have to assume and project the impact of market influences for each individual over their working life. I think that this would be virtually impossible.
	The additional costs of this could clearly be substantial and could prevent businesses being sold. Any increased costs could affect the possibility of restructuring.
	Pension provision by employers is at present voluntary. This policy, which introduces an element of compulsion for transferred employees only, has been designed to balance the rights of employees with the need for employers to control costs. The amendment would shift that balance away from the employer, increasing the cost of takeovers.
	We have gone a long way to ensuring that a decent minimum platform is provided for TUPE arrangements, which is private to private. I think that my noble friend's amendment takes that too far. It would be very hard for it to work in practice; it would also go beyond what we think is reasonable under the circumstances in which we envisage these proposals applying. So I am unable now, as in Committee, to accept my noble friend's amendments.

Baroness Turner of Camden: My Lords, I thank my noble friend for that quite detailed response. I can understand that it could be quite a complicated matter in some companies. Nevertheless, the principle is really quite important—the acceptance of the view that all of us in the trade union movement have held for a long time, that pensions are deferred pay.
	If that is so, it is reasonable to try to get as near as possible to what was on offer before the transfer took place. Moreover, it has been stated again that, if this were to be put into operation, it might mean that actual transfers did not take place, with consequent loss of employment to people who otherwise would be transferred into other employment. That is a consideration.
	On the other hand, I reiterate the principle that deferred pay is important. I will not press the amendment this evening, but I will consider carefully what my noble friend has said and see whether there is any way in which we can return to this at a later stage. In the mean time I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 243 to 245 not moved.]
	Clause 258 [Consultation by employers: personal pension schemes]:

Baroness Turner of Camden: moved Amendment No. 246:
	Page 189, line 43, at end insert—
	"(c) proposes to reduce the contributions which the employer pays to the personal pension scheme"

Baroness Turner of Camden: In moving Amendment No. 246 in my name and that of my noble friends Lord Hoyle and Lady Dean, I shall also speak to Amendments Nos. 247 and 248 in the same group.
	The first amendment deals with the situation in which it is proposed that contributions to personal pension schemes be reduced. My amendment requires consultation when an employer who contributes to a personal pension proposes to reduce his contributions.
	The category of schemes concerned is wider than might be supposed. Group personal pensions—the commonest form of the DC arrangement and the usual mechanism for providing stakeholder pensions—are personal pensions and not occupational schemes. The clause as drafted requires the employer to consult if it is proposed to change the application of contributions—if the employer proposes to go to a different life office to provide its stakeholder or other GP arrangement. It does not require anything to be done by way of consultation if the employer proposes to change the amount of contributions; surely a more important issue as far as the employee is concerned.
	The other amendments in this group deal with consultation and what happens if there is a failure to consult. The Minister made the point in Committee that the content of the right to be consulted can be set out in regulations. However, the penalty for failure to consult cannot and, as drafted, the Bill allows the regulator to fine the employer or trustees only if there is a failure.
	The amendment puts enforcement in the hands of the unions and that is important. It is modelled on the tried and tested arrangements for equivalent consultations in the event of collective redundancies or in the event of a TUPE transfer. It gives the union the right to enforce the obligation to consult and to do so through an employment tribunal if necessary. After all, this is an employment issue. Employment tribunals exist for that purpose. The employment tribunal may make a declaration to that effect if it finds that there has been a failure to consult. It may order appropriate compensation to be paid. I emphasise that we are dealing with employment issues, and tried and tested methods exist for dealing with such matters.
	The amendments also set out what the consultation regulations shall require. The employer shall consider any representations made by persons prescribed, must reply to the representations and, if he rejects any of those representations, state his reasons. In view of what has happened recently in the pensions industry, it is surely important that employees and those representing them should have a great deal more involvement in whatever changes may be proposed in relation to their schemes. I beg to move.

Lord Hoyle: My Lords, I rise to support my noble friend in these amendments. There does not seem to be a cost element, but what is important is the consultation with the employee concerned. As my noble friend has said before when she has been on her feet, we regard pensions as part of deferred salary. The matter is very important to ordinary people. Pensions are vital to them. Changes that take place should not be made unilaterally. Consultation should be required.
	Not only should consultation take place, it is very important when we look at Clause 258 that, having considered the views of the employees, the employer must then make it clear why he or she is rejecting the representations that have been made. That is natural justice, and I hope that the Minister can accept this very reasonable proposal.

Baroness Hollis of Heigham: My Lords, the three clauses, Clauses 257, 258 and 259, introduce the requirement to consult. These clauses place a statutory obligation on employers to consult before making major or significant changes to future pension arrangements. The obligation will apply to employers who offer occupational pension schemes or group personal pension schemes which have direct payment arrangements in place.
	Amendment No. 246 would ensure that an employer must consult before making a reduction in contributions that he pays to an employee's personal pension scheme. The effect would be to impose the obligation to consult in the instance of any reduction in contribution—for example, to changes such as corrections for past overpayment. We intend to use the power in Clause 258 (1)(b) to prescribe decisions that significantly reduce or remove an employer contribution to a personal pension scheme with direct payment arrangements.
	Amendment No. 247 would allow employees and trade unions to make a complaint to an employment tribunal, if an employer failed to consult on future changes to personal pension schemes when direct payments exist but not, as it happens, in respect of changes to occupational pension schemes. It would enable the tribunal to make an award of compensation of up to 13 weeks' pay to affected employees in respect of personal pension schemes only. I am not sure whether that was the precise effect intended by my noble friend's amendment.
	Part of the duties and objectives of the regulator is to promote compliance and best practice by employers. The regulator has powers to investigate and require employers to provide evidence of compliance. In cases of non-compliance, sanctions may be imposed by way of a civil penalty. I cannot see that it would be appropriate to have employment tribunals make compensation awards against employers in cases of personal pension schemes only, whereas the regulator would sanction employees, trustees or managers in the other occupational pension schemes.
	Amendment No. 248 would require employers to consult with a view to seeking agreement and to consider and reply to any representations made, explaining the reasons for any rejections—but, again, only in respect of personal pension schemes. Private pension provision is made voluntarily by employers as part of good HR practice. Therefore, it is right that a requirement to consult on pensions has some differences from existing legislation such as collective redundancies and TUPE transfers, where there are statutory consultation requirements which arise from European directives relating to the protection of employment.
	Seeking to put changes to pension provision on the same footing as collective redundancies, for example, would constitute a significant step towards compulsory employer provision of pensions. We intend real substance to these consultative processes and believe that the use of the term "consultation" conveys this in itself. There is established case law to the effect that consultation means the communication of a genuine invitation to give advice, and a genuine consideration of that advice. So it is unnecessary to add the step-by-step procedure suggested by my noble friend. It will be for the Pensions Regulator to consider the actions of an employer in relation to existing and established case law in respect of consultation.
	With that fairly lengthy reply, I hope that my noble friend feels able to withdraw her amendment.

Baroness Turner of Camden: My Lords, I thank my noble friend for that response. We attached the amendments to the provisions in relation to personal pensions, mainly because there has been a growth in that area in recent years. The Government have been intent on encouraging the growth of stakeholder pensions—and we will have more to say about that later. That introduces another element into the whole pensions and employment scene, and there must be some means of dealing effectively with it. We believe it to be an employment issue on the same basis that we believe pensions of any kind are deferred pay. Therefore, we attached our amendments to the part of the Bill dealing with personal pensions. However, I note what has been said, and shall consider it carefully in the Official Report to see whether there is any way in which we might pursue the issue of consultation at a later stage. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 247 and 248 not moved.]
	Clause 260 [Modification of subsisting rights]:

Baroness Hollis of Heigham: moved Amendment No. 249:
	Page 191, line 6, leave out from "scheme" to "to" in line 7.

Baroness Hollis of Heigham: My Lords, Amendments Nos. 249 and 250 amend new Section 67(1) of the Pensions Act 1995, contained in Clause 260, by introducing a power to exempt prescribed schemes or schemes of a prescribed description from the requirements imposed by new Section 67. They are technical amendments to ensure that we have the necessary powers to exempt certain types of scheme from the Section 67 provisions. The schemes that we have in mind are "non-approved" or "not registered" for tax purposes. They are currently known as funded unapproved retirement benefits schemes, and unfunded unapproved retirement benefits schemes. From April 2006, they will be known as employer-financed retirement benefit schemes.
	Those schemes do not receive tax privileges and are mainly top-up schemes providing benefits to senior employees in excess of Inland Revenue limits. They are exempt from most of the provisions in the Pensions Act 1995, on the grounds that they do not need the protection afforded to ordinary occupational pension schemes. The power contained in the amendments will allow us also to exempt them from the new Section 67 provisions. That seems sensible; I hope noble Lords agree. I beg to move.

Lord Higgins: My Lords, is the cap imposed by the Chancellor of the Exchequer on the total or maximum that anyone can draw in pension schemes affected at all by the provisions?

Baroness Hollis of Heigham: My Lords, my immediate response is to say that I cannot see how it could be. If I am wrong, I shall write to the noble Lord.

On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendment No. 250:
	Page 191, line 7, at end insert "other than a power conferred by—
	(a) a public service pension scheme, or
	(b) a prescribed scheme or a scheme of a prescribed description."
	On Question, amendment agreed to.

Baroness Turner of Camden: moved Amendment No. 251:
	Page 196, line 19, after "rights" insert "and those of any other person contingently entitled to benefits under the scheme through him,"

Baroness Turner of Camden: My Lords, the clause contains complex new procedures to allow, under prescribed rules, past-service benefits to be modified so long as their overall value is not reduced. It modifies Section 67 of the Pensions Act, which places a rigid restriction on changes that affect past-service rights and has been criticised as inflexible and a barrier to simplification.
	Some concern has been expressed that the test of actuarial equivalence is not sufficiently defined. An overall test of value will seemingly have to make assumptions about members' circumstances, to assess the actuarial value of their past-service benefits. At an aggregate level an actuary could calculate the equivalent value, but that might not be wholly relevant to the circumstances of particular members, who may or may not have dependants defined under current rules.
	The amendment requires the actuary to take account of the interests of dependants in assessing equivalence. That is what it is really about. It suggests that account must be taken of the rights of,
	"any other person contingently entitled to benefits under the scheme through",
	the member. I hope that it will be sympathetically received by the Minister. I did not have the opportunity to make those points on the amendment in Committee. I beg to move.

Lord Higgins: My Lords, the noble Baroness is correct is saying that some concern has been expressed about the provisions. In simple terms, if I understand correctly, the concern is that the actuarial equivalence will be for the average and there may be dispersal around it. Some people will gain and others will lose, even though the situation is said overall to be equivalent. What is important is what happens to the individual, not what happens on average.

Baroness Hollis of Heigham: My Lords, the amendment concerns contingent benefits payable to survivors. It seeks specifically to include rights of contingent beneficiaries in the calculation of an actuarial value as if they were rights actually belonging to the contingent beneficiary. However, contingent beneficiaries do not accrue pension rights of their own. It is the scheme member who accrues those rights on behalf of the contingent beneficiary. Clause 260 has been drafted to that effect.
	The provision in new Section 67C(8), which the amendment seeks to change, provides that the actuarial value of a member's subsisting rights after a scheme modification has been made must be at least equal to the value of the member's rights immediately before the modification. The definition of "subsisting rights" in new Section 67A(6) says that subsisting rights in relation to a member include any right that has accrued to or in respect of him. The words "in respect of him" capture any rights the member may have in respect of contingency benefits, such as survivors' benefits.
	My noble friend's amendment is, therefore, unnecessary and I hope that she feels able to withdraw it.

Baroness Turner of Camden: My Lords, I thank the Minister for that response. This is a complex issue. I will study her comments carefully in Hansard. Meanwhile, I have no intention of pressing the matter tonight and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 266 [Payments made by employers to personal pension schemes]:

Lord Skelmersdale: moved Amendment No. 252:
	Page 212, line 1, after "must" insert "except in prescribed circumstances"

Lord Skelmersdale: My Lords, I shall talk extremely briefly to what I believe is an old chestnut that ran through discussions on both the 1993 and 1995 Bills. My excuse for doing so is that I was not involved in them at the time—I was doing a few other things.
	The issue is that of regulations in respect of occupational pension schemes. I believe that the obligations in respect of personal pension schemes and occupational pension schemes in this instance should be the same. The amendment seeks to ensure such conformity. It is intended to allow the issue of regulations to prescribe circumstances where a notice is not required. That explanation may be somewhat confusing to the noble Baroness, because I have a nasty suspicion, now that I look at the matter again, that the amendment is not actually in the right place. But I have no doubt that she will tell me if that is correct and, indeed, whether it is an old chestnut. On that basis, I beg to move.

Baroness Hollis of Heigham: My Lords, I accept that the noble Lord, Lord Skelmersdale, was not around in 1993 and 1995, when these issues were discussed, however he was around when he moved the same amendment on 13 October in Grand Committee. So I had hoped that he might have thought that my answers to that identical amendment were satisfactory. Clearly, they were not. All I can do is recycle them, because the same objections to his amendment remain now, as they did then—so I am slightly puzzled.
	However, I can understand the argument for a consistent approach to be taken between the provisions relating to personal pension schemes in what is now Clause 266, and to occupational pension schemes in Clause 267. Indeed, we are taking the same the approach. Trustees should inform the regulator within a "reasonable period" about late payments which are of "material significance", and the regulator will issue a code of practice on the meaning of those terms to help trustees interpret these legal requirements. However, taking a power to prescribe the circumstances when the trustees of a personal pension scheme do not have to report a late payment to the regulator is unnecessary and will not provide any additional clarity.
	The current Section 111A of the Pension Schemes Act 1993 contains such a power. And regulation 4(2) of the Personal Pension Schemes (Payments by Employers) Regulations 2000 provides that a late payment need not be reported if the regulatory authority has informed the scheme that such a notification need not be made.
	Under our new provisions, the Pensions Regulator will have that power in any case—either by a notification to an individual scheme or, in a more general way, by guidance in a code of practice. Given that the outcome is already achieved, we do not believe that it is necessary also to take a power to prescribe.
	I could continue, but I will stop there and I hope that I have given the noble Lord the reassurance that he sought.

Lord Skelmersdale: My Lords, well, perhaps the chestnut was not quite as old as I suggested. I found that explanation somewhat easier to understand than the Minister's original explanation. She certainly did not make it clear to me then—whether I was listening comprehensively, and have read since in the alternative sense of the word, I do not know. But she has now said that the aim of the amendment is already achieved under Section 111A of the 1993 Act. On that basis, I am totally satisfied and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 271 [Resolution of disputes]:

Baroness Turner of Camden: moved Amendment No. 253:
	Page 226, line 46, at end insert—
	"( ) Where an application for the resolution of a pension dispute is made in accordance with the dispute resolution arrangements, the trustees or managers must—
	(a) take the decision required on the matters in dispute within a reasonable period of the receipt of the application by them,
	(b) notify the applicant of the decision within a reasonable period of its having been taken, and
	(c) notify the applicant that the Pensions Advisory Service is available to assist in connection with any difficulty which remains unresolved and the address at which it may be contacted."

Baroness Turner of Camden: My Lords, I start by declaring my interest. For many years, I have been a member of the board of OPAS, the Occupational Pensions Advisory Service—the "Pensions Advisory Service" referred to in the amendment.
	OPAS is an unusual and, in my view, thoroughly praiseworthy service. It was founded years ago by a retired civil servant (who, when I knew her, was secretary to the Occupational Pensions Board) and her partner, who was the pensions adviser to BALPA, the airline pilots' association. The idea was that people who were, or had recently been, professionals in the pensions industry should be recruited on a nationwide basis to provide advice to individuals with pension problems and to do so for free.
	Over the years, a network of advisers was established from professionally qualified people who wanted to give something back to the community. The service gradually attained prominence. A small full-time administrative staff was appointed; it attained acceptability by successive governments; and funding for its administrative centre was secured. That was provided, first, by the Occupational Pensions Board and later by OPRA. The Government will continue the funding under the new arrangements—not via the regulator but directly from the DWP, which has promised to maintain the independent role so valued by the service.
	It is acknowledged that the service is a very good one, that it is professionally administered and that the advice, which, as I said, is free, is of considerable help to many people. It also acts as a sifting mechanism for the ombudsman service. The Minister has assured me that the Government continue to value what is done.
	The service recently celebrated its 21st birthday. It has 525 advisers nationwide. It runs a telephone helpline at its Belgrave Road offices and, in the past year, the number of calls totalled 52,000. It also now advises on stakeholder and state pension problems, and so it has dropped "Occupational" from its title and will now simply call itself the Pensions Advisory Service. It has done a remarkable job in recruiting professionally qualified people, who give their services to others free. We simply pay expenses.
	At the last board meeting that I attended, other board members wanted to have the organisation named in the new Bill. In view of what the Minister has already told me, it seemed a good idea to set out in an amendment precisely what is done and to notify applicants of the way in which the Pensions Advisory Service can be contacted. I hope that the amendment will be sympathetically received. I beg to move.

Lord Hoyle: My Lords, I support my noble friend. She has outlined in great detail the quality of the work done by the Pensions Advisory Service, and I shall not go over that again. It is very important that that work continues and this is one way of bringing it to people's attention. Therefore, I agree with my noble friend and hope that the amendment receives sympathetic consideration from the Minister.

Baroness Hollis of Heigham: My Lords, I shall be very brief. I join my noble friend in paying tribute to the Pensions Advisory Service. The service is available for any scheme member to use at any point. However, we accept that it is important to remind members of the Pensions Advisory Service when they are going through a dispute. Therefore, we make it clear in regulations that trustees and managers are required to notify applicants that the Pensions Advisory Service is available to advise and help with any disputes. I hope that, with that assurance, my noble friend will feel able to withdraw her amendment.

Baroness Turner of Camden: My Lords, I am sad that it is not accepted that my proposal should be included in the Bill because I think that it would have been useful to have done so. However, I do not intend to press the matter at present and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 276 [Annual increase in rate of certain occupational pensions]:

Baroness Turner of Camden: moved Amendment No. 254:
	Leave out Clause 276.

Baroness Turner of Camden: My Lords, in moving Amendment No. 254, I could speak also to Amendments Nos. 255 and 256 because the issue that I wish to raise is the same in all three. This matter was raised and discussed to some degree in Committee. At that stage, I notified my intention to raise it on Report because I was not happy with the response received.
	Under present law, all benefits earned after April 1997 must be increased at a minimum by the lower rate of inflation or 5 per cent a year when they come into payment. The Bill will reduce the figure of 5 per cent to 2.5 per cent. In DB schemes, I gather that it will take effect only where there is a change in the rule to take advantage of it. This has been justified as being a suitable response to lower inflation, offering a saving to employers, and it would appear to be compensation for the cost arising from the PPF levy.
	The issue was debated in Committee but we failed to convince the Minister that what we were saying was fair and reasonable. The amendment seeks to maintain the status quo. In principle, it is desirable that pensions should hold their value over what can be a long period of retirement. Women, who tend to live longer than men, will suffer potentially disproportionately if this change goes through.
	There is absolutely no guarantee that inflation will remain at its present low level, although we all hope that it does. It has been said that the proposal to reduce the inflation guarantee will help employers in the industry who are wary of the present proposed levy, but why should older pensioners have their pensions threatened with a fall in value in order to meet these concerns? I said in Committee that I could not accept the reasoning behind the Government's opposition to the proposal to retain the 5 per cent cap and I am therefore returning to the argument on Report. I beg to move.

Lord Hoyle: My Lords, I support my noble friend's amendment. It is important that consideration is given to the status quo because inflation may not stay where it is. We all hope that it will remain low, and in that our Government have been highly successful, but who knows what will happen in the future? This is an attempt to protect pensioners and we ask only that the status quo be maintained. I hope that the amendment receives favourable consideration.

Lord Higgins: My Lords, during the course of the Bill, I have been astonished by the number of avid readers of Hansard who appear to be interested in our debates. The same cannot always be said of the press. However, given the amendment moved by the noble Baroness, Lady Turner, I should clarify my position.
	In Committee, I argued strongly with the noble Baroness that the Government's proposals, as part of their "package" for getting those in the industry to agree to the Bill, were that the rate of indexation for inflation protection, which turns up here and in other parts of the Bill, should be reduced from 5 per cent to 2.5 per cent. My argument was that the trouble with the deal was that those who would gain from the Bill were not those who would suffer if inflation took off and they were protected only to the extent of 2.5 per cent rather than 5 per cent. That argument is still valid.
	However, I have since examined the issue in greater depth and the problem is that it is part of a package. The Pickering report strongly argues that in any event there is a case for reducing the rate from 5 to 2.5 per cent, but the fact that it is mixed up in this Bill is, to say the least, confusing. However, his arguments are strong in one respect.
	I share the views of the noble Lord, Lord Hoyle, on future inflation. The Chancellor is borrowing enormous sums of money and one of two things will happen. He either funds the borrowing fully, which can be done only at significantly higher interest rates, or he does not. In that case, the money supply—an unfashionable subject—increases and so does inflation. We are potentially in a dangerous inflationary situation or one in which interest rates rise very fast.
	Against that background, it is worrying, but I also carried out further consultations and the argument from some in the industry was that the potential cost of this amendment to schemes, certainly if inflation takes off, could be very great indeed—perhaps even greater than the levy. I have received some representations saying that. Consequently, there is a real problem here as regards the burdens imposed on pension schemes and the balance between them.
	As the noble Baroness has raised this amendment, I thought it right to make my own position clear. On balance, I am persuaded that it is right to go to 2.5despite the fact that that may have very serious effects on pensioners. On the other hand, there is advantage in the scheme. The unfortunate point is that the Government have not presented this argument on its merits, but have mixed it up in a package which implies some sort of deal. As I say, I thought it right to make my own position clear. I am persuaded, contrary to some of my own arguments in Committee, that probably this is not the right amendment to accept. I thought an explanation was due from me, lest those who read the first debate wondered why on earth I was silent now.

Baroness Hollis of Heigham: My Lords, it is a package. I have no hesitation in saying that. We seek to preserve the viability of occupational pensions, particularly DB schemes, where possible. We are doing that by going for a pension protection fund which is paid for by the industry. What we are told by the industry—the noble Lord, Lord Higgins mentioned this—is that one of the biggest concerns about the viability of schemes is the fact that the industry has to insure, almost speculatively, against future rates of inflation at 5 per cent whether they happen or not. Therefore, for us to seek to ask them to insure, while at the same time carrying a responsibility for the 5 per cent, was unreasonable. The truth is that we would not have had consent to what we believe is the greater good, which is actually an insurance fund without some offsetting arrangements with the industry.
	My noble friend's amendment—I take it that this includes Amendments Nos. 255 and 256, as she said—would impose price indexation at 5 per cent on defined contribution schemes, which I very much hope she does not think now is sensible. Where people have a free choice, 75 per cent of them go for level annuities. We think it is now unreasonable—we debated this with the noble Lord, Lord Hunt—to continue to impose even limited price indexation on even a portion of a DC pension pot in order to meet the GMP rights. I hope that my noble friend will accept that.
	I return to the main body of pension provision—namely, that comprising DB schemes—with which I believe my noble friend is most concerned and which forms part of our package. I appreciate that noble Lords may think that this will mean lower increases in pensions in payment, but against that one has to set the risk of not having a pension at all. We calculate that the total effect of this is about 2 per cent over a lifetime; possibly 2.2 per cent for women. There is a marginal additional disadvantage to women because of their greater longevity, but equally over a period of time they also take out more from a DB scheme, even though there are the same rates of accrual, because they live longer. The money has to come from somewhere.
	I want to make a second point which I do not believe we made in Committee and which may help our consideration of this. LPI currently requires all occupational pensions built up from 6 April 1997 to be increased by RPI capped at 5 per cent. At the time that it was introduced—with the folk memory of the late 1980s and 1990s—it was only ever intended to provide a degree of protection against inflation. It was never unlimited price indexation.
	However, over the years, our success in controlling prices has meant that inflation has been consistently low and has never risen above 4 per cent. That means that the existing cap is not so much a cap as full protection. That was never intended. It was meant to be a contribution towards it, rather than full protection. It imposes large and, on the whole, unnecessary liabilities on the schemes in respect of their forward funding requirements, given the need to plan for contingencies.
	I mentioned DC schemes. I am sure that my noble friend does not intend the provision to affect DC schemes. On DB schemes, I accept that it is part of a package. We are trading off the desirability for insurance against the capacity of schemes to maintain their existing level of RPI indexation at 5 per cent for rights built up from 5 April, 1997. The advice from the industry is that that, more than almost anything else—along with longevity, I suspect—contributes to the destabilisation of their books for the future funding of DB schemes.

Lord Oakeshott of Seagrove Bay: My Lords, I see the force of the arguments that the noble Baroness makes and that the industry has made to us about the package deal and the great difficulty of getting the whole thing to hang together, if the reduction in the LPI were not made in this way. Despite the considerable reservations that I expressed in Grand Committee, I am persuaded by the combined charms of the noble Baroness and Mrs Farnish of the NAPF.

Baroness Hollis of Heigham: My Lords, all that I can say to my noble friend is that she will understand that, because of the package, we are not willing to go down that path. The 5 per cent indexation has played a greater part than we anticipated in 1997.
	We will not be able to accept the amendment. I am sure that my noble friend would not wish us to revisit the issue of DC schemes. We do not propose to do so, as we have made an undertaking on that. I understand where my noble friend is coming from, but, I regret, she cannot keep the bits that she likes, such as the PPF, and get rid of the bits that she does not care for. We cannot do that. It is a construction that has been carefully negotiated and consulted on. I ask your Lordships not to unpick it at this stage and not to accept my noble friend's amendment.

Baroness Turner of Camden: My Lords, I thank my noble friend for that explanation, which did not surprise me in the least. She told us in Committee that it was all part of a package that could not be unpicked. That is unfortunate, as it will mean that, in the main, older pensioners will suffer if there is a rise in the rate of inflation. There are indications that that may happen in the next year or so. We cannot be certain that we will be lucky enough to have such low inflation indefinitely.
	We have a package that, in the main, we all want. We all want the Bill to go through and to provide the security and insurance that it will provide for future members of pension schemes. However, it is unfortunate that one of the items in that deal involves some loss of security for future older pensioners. Having said that and having listened to the debate, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 277 [Annual increase in rate of certain personal pensions]:
	[Amendment No. 255 not moved.]
	Clause 278 [Power to increase pensions giving effect to pension credits etc]:
	[Amendment No. 256 not moved.]
	Clause 283 [Meaning of "stakeholder pension scheme"]:

Baroness Turner of Camden: moved Amendment No. 257:
	Page 235, line 7, leave out "(10)" and insert "(11)"

Baroness Turner of Camden: My Lords, in moving Amendment No. 257, I shall speak also to Amendments Nos. 258 and 259. The amendments stand also in the names of my noble friends Lord Hoyle and Lady Dean of Thornton-le-Fylde. The amendments are drafted solely as a means of advocating a minimum level of compulsory contributions by employers and employees. They relate to a clause defining requirements for stakeholder pensions for employers and employees.
	Stakeholder pensions were originally designed specifically by the Government to provide a pension framework for thousands of employees without pension provision via occupational schemes. While employers are obliged to facilitate access by their employees to a stakeholder pension, they are not obliged to make a contribution.
	As everyone knows, and, I think, the Government accept, take-up has been disappointing. But the picture changes when the employer makes a contribution. There is a developing consensus that compulsion will eventually be required if the problems facing pension provision are to be resolved more effectively. The Bill still seems committed to the voluntary approach, but nobody now believes that it will resolve future problems.
	We have returned to this argument because, although our amendment was not agreed in Committee, there seemed to be a general view that compulsion would need to be considered fairly urgently. It will be recalled that during a debate on pensions in the House of Lords, the noble Lord, Lord Fowler, indicated support for the notion of compulsion.
	I do not deny that there could be problems. Getting people to agree to compulsory deductions from their salary to go into a pension scheme is likely to be acceptable only if there is a general view that the scheme to which they are contributing is likely to offer security. In that respect, it is perhaps a good idea to raise the issue within the context of this Bill, for this legislation is concerned, above all, with security. For the first time, we are to have legislation specifically designed to regulate, and to do so on the basis of the security of the investment made by the individual member. It is a wholly praiseworthy endeavour; I support what the Government are attempting.
	However, if people believe that their pension will be secure, there is more reason to ensure that they will contribute to it. Our amendment, therefore, involves a contribution from employees as well as employers. There is mounting evidence that public opinion is increasingly supportive of compulsion. Moreover, as I said in Committee, a survey indicated that 72 per cent of the members of my union are in favour of compulsion, including employee compulsion. The time is ripe for a move on this issue. I therefore beg to move.

Lord Hoyle: My Lords, I shall speak briefly, as my noble friend has set out the case in detail. Although we hope that voluntary methods might succeed, all the practical circumstances show that they will not. I think that compulsion will be needed in the end. Where the employer makes a contribution, employees' take-up of the scheme is considerably better. Although I hope that voluntary methods will work, I am afraid that they will not. That is why I support the amendments.

Lord Lea of Crondall: My Lords, I guess that this amendment will not be agreed to, but it is very timely that my noble friend Lady Turner has tried to sketch out one way in which compulsion could work. Interestingly, not only did Amicus members vote in favour of compulsion but the results of a national poll, reported in a broadsheet last week, indicated that people across the nation favour it. There was a very high figure—at least as high as the one that my noble friend mentioned.
	The proposal requires a tremendous amount of thought. It is very much on the agenda. Its timing will depend on when we get the definitive Turner report, no doubt within six or nine months after the election. I hope that the noble Lord, Lord Higgins, will allow me to mention the word "election", because Adair Turner said that the definitive proposals would be published after the election. The amendment is very timely, because, along with my noble friend Lord Hoyle, I think that the issue is firmly on the agenda for consideration in the not-too-distant future.

Baroness Barker: My Lords, I am entirely in sympathy with the aims of what the noble Baroness, Lady Turner, is trying to do. On this side of the House our difficulty with the amendment is that it is prescriptive about the level of contribution. I say that with some feeling. As the noble Baroness may know, I work with very small employers. When stakeholder pensions were introduced, they tried their level best to find money to put into pensions for people who previously had not had any pension cover at all. They struggled with that, but they managed to do it.
	This late hour is not the time to go into the extent to which stakeholder pensions have or have not succeeded, but many people who have them were never previously allowed to join pension schemes. When one takes into consideration not only that compulsion of this magnitude is a lot to put on the salary bill of a small employer and that for many small employers it will also probably have to cover people who were never previously covered, it becomes something of a mountain for employers to climb.
	I have no doubt that the noble Baroness, Lady Turner, is travelling in the right direction. I hope that, as the noble Lord, Lord Lea of Crondall, said, when, after the election, this becomes a matter that is more fully, openly and transparently discussed, we will find a greater degree of consensus than is possible under these amendments.

Lord Skelmersdale: My Lords, I do not know if the noble Baroness, Lady Turner, has read the recent report of your Lordships' Economic Affairs Committee. In, I think, chapter 10 of that report, the point is made that the take-up of pension schemes by employees shoots through the roof, in comparative terms, when the employer makes a contribution.
	Some time ago, when I was chairman of the Stroke Association, I set up a new pension scheme for the employees of that charity where equal payments of employer and employee, up to what we reckoned we could afford as trustees, which was 9 per cent, would be appropriate.
	The trouble with the amendment proposed by the noble Baroness, Lady Turner, lies in new subsection (12). So I go along very much with what the noble Baroness, Lady Barker, said. The idea of a 2:1 ratio of employer to employee contributions in a prescriptive way fills me with total horror.

Baroness Hollis of Heigham: My Lords, currently, we have a voluntary approach to pensions. Basically, my noble friend is arguing for a compulsory pension system in this country at what, I accept, is really quite a high level of contributions. A 10 per cent contribution from the employer, plus 5 per cent from the employee, plus the effect of tax relief, plus recycled rebates, as well as the basic state pension and so forth, probably produces about an 80 per cent replacement rate over a full working life, which might seem quite high in terms of the employer's contribution.
	While pensions remain voluntary, the Government are committed, as your Lordships know, to increasing the take-up of pension schemes. We are doing that through our informed choice programmes and automatic enrolment proposals, where, again, the numbers shoot through the roof: we have spoken to senior executives of major companies that have gone to automatic enrolment where membership of pension schemes has increased from 47 per cent membership to more than 90 per cent.
	As we discussed earlier, above all, where employers do not make financial advice and information available to employees, they will be exempt from doing that only if they are already making a contribution of at least 3 per cent. We hope that with all of these measures we are increasing the pressure on employers to make adequate pension provision for employees through employer contributions, and of course employee contributions as well.
	As my noble friend Lord Lea suspected, we shall not go beyond that until the second stage of the Turner report, which we shall have next year. If my noble friend is right that there is a growing movement towards compulsion and a growing consensus behind it, I am sure that the Government will want to take that on board. Until we have it, and until we have the information from it, the amendments are premature, even if the detail in terms of the figures were acceptable. I ask my noble friend to withdraw her amendments.

Baroness Turner of Camden: My Lords, I am not surprised at that response, and thank the noble Lords who contributed to the discussion.
	It is all part of a general drive towards some form of compulsion. Eventually we shall get there—probably after the second report from Adair Turner. I understand why the Government may wish to wait until we have that report.
	This short debate is all part of the general campaign and drive to what will eventually become compulsion, which we shall have to have if people on pensions are to have any sort of security. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 258 and 259 not moved.]

Baroness Crawley: My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.
	House adjourned at twelve minutes past six o'clock.